S&P 500 eases slightly from fresh record high after stronger economic growth
On Friday, UBS upgraded Life360 stock from Neutral to Buy and increased its price target from $52.00 to $55.00, adding to the bullish analyst consensus with targets ranging from $50 to $58. Currently trading at $40.57, the stock has demonstrated strong momentum with a 50.26% return over the past year, according to InvestingPro data.
The upgrade comes with a positive outlook on the company's advertising revenue potential. UBS analysts have expressed increased confidence in Life360's mid-term advertising revenue opportunities, which they believe could be realized faster than the market anticipates.
The firm's analysts project a 34% upside to the new price target, underpinned by a forecast that Life360's fiscal year 2026 revenue will be $25 million, which is 4.5% higher than the consensus. This optimistic revenue estimate is entirely driven by their expectations for the company's advertising revenue.
UBS has gathered insights from advertisers that suggest Life360's investments in advertising technology, its unique data, and the brand-safe environment it offers could lead to a swift increase in this revenue stream. Additionally, they anticipate that this will result in high incremental EBITDA margins in the long term.
Life360's core subscription business has also shown resilience, with monthly active users (MAUs) accelerating in three of the last four quarters and potentially increasing again in the fourth quarter. The company's financial health is rated as GOOD by InvestingPro, supported by impressive revenue growth of 18.7% in the last twelve months and a strong current ratio of 2.76x, indicating solid liquidity management.
Despite a 15% decrease in share price since the third-quarter financial results were announced, UBS views the current valuation as an attractive entry point. The analysts have noted the stock is trading at 40 times their above-consensus fiscal year 2025 EBITDA estimates, compared to the fiscal year 2024 trading range of 38-54 times.
The recent dip in share price followed several events, including a downward revision of the fiscal year 2024 revenue guidance due to logistical issues in Life360's non-core Hardware segment, a significant stock sell-off by CEO Chris Hull, and a lower weighting in the Russell 2000 and 3000 indices.
Despite these factors, UBS anticipates that the fiscal year 2025 guidance, to be provided on the fourth-quarter 2024 earnings call scheduled between February 27 and February 25, could surpass Street estimates, with UBS's own revenue and adjusted EBITDA projections being 1% and 9% higher, respectively. While trading at a relatively high Price/Book multiple of 9.35x, InvestingPro analysis suggests the stock is currently overvalued.
Investors seeking deeper insights can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, which includes detailed analysis of Life360's valuation metrics, growth prospects, and 12 additional ProTips.
In other recent news, Life360's third-quarter earnings report revealed a mixed picture, with consolidated revenue and profitability falling short of expectations. However, the company's Subscription segment demonstrated robust growth, setting new quarterly records for monthly active users, Paying Circles, and revenue. This growth was attributed to increased international market penetration, a rise in average revenue per paying circle, and a successful back-to-school season.
Despite lower hardware revenue due to delays in launching the new Tile product line, the company resolved these issues, leading to a doubling of direct-to-consumer sales in the six weeks following the product line's launch. Analysts from Canaccord Genuity and Evercore ISI have maintained positive ratings on Life360, raising their price targets to $58.00 and $55.00 respectively, reflecting confidence in the company's continued growth trajectory.
Other firms, including Loop Capital Markets, Stifel, and JMP Securities have also initiated coverage on Life360 with positive ratings. These recent developments underscore the company's strong position and growth potential in the market.
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