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Life360 (360): Riding the wave

Positive market update

Life360 provided a market update and the key take-out in our view was a soft upgrade in the guidance for annualised monthly revenue (AMR) in December 2021 from in the range of US$110-120m to now “at the higher end” of this range. The key drivers of the upgrade were “early success of user experience improvements and a recent surge in downloads driven by virality on social media, primarily TikTok”. The company also said a further update will be provided at the release of the 1H2021 result in August when “the extent, impact, and duration of the new wave of registrations will be clearer” suggesting there may be some further upside to the guidance. The other key take-out from the update was a US$2.1m investment in the company by a group led by Bryant Stibel which is an investment company founded by Kobe Bryant and Jeff Stibel.

Modest revenue upgrades

We have modestly increased our revenue forecasts in 2021, 2022 and 2023 by 1%, 2% and 2%. The key driver of these upgrades is increases in our AMR forecasts in December each year – in turn driven by a higher number of year end paying circles – and note we now forecast year end AMR of US$120.0m in 2021 versus our previous forecast of US$116.6m. Despite the revenue upgrades there is little change in our EBITDA forecasts as we have also allowed for some additional investment in areas like customer acquisition. Note our updated forecast underlying EBITDA loss of US$(14.5m) is consistent with the guidance of a loss no greater than US$(15m).

Investment view: PT up 11% to $7.75, Maintain BUY

We have updated each valuation used in the determination of our price target for the revenue changes as well as market movements and time creep. We have also reduced the discount we apply in the relative valuations from 15% to 10% given the prospect of a further positive update at the release of the 1H2021 result in August. The net result is an 11% increase in our PT to $7.75 which is >15% premium to the share price so we maintain our BUY recommendation. The next potential catalysts are a strong quarterly update in late July and then a guidance update in late August.

Earnings Forecast - Life 360

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Authored by Chris Savage – Analyst – at Bell Potter Securities, 30 June 2021
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