Company Reports

We raise our fair value estimate for no-moat Life360 by 13% to AUD 17.50, following its second-quarter results. The company continues to demonstrate decreasing cost per-incremental monthly active user, which we view as a key metric for growth and efficiency. We estimate Life360 spent less than $3 per-incremental MAU during the quarter, which is less than half of what it spent two years ago. We think Life360 is in a strong position to continue to grow rapidly and build its competitive advantage. But it’s priced accordingly and shares screen as fairly valued.

We expect Life360 to primarily focus on continued investment in the improvement of user retention within its core Life360 product.

We expect Life360 to primarily focus on continued investment in the improvement of user retention within its core Life360 product.

We raise our fair value estimate for no-moat Life360 by 11% to AUD 15.50 following its first-quarter results. The reason for the upgrade is the unexpected improvement in its marketing efficiency. Life360 also announced a potential partnership with Hubble Network, which we view positively but is too uncertain at this stage for us to incorporate into our valuation. At current prices, Life360 shares screen as slightly undervalued.

No-moat Life360 is performing broadly in line with expectations in first quarter 2024. Paying circles rose to approximately 1.9 million, a 21% increase on the previous corresponding period. This broadly tracks our 20% growth forecast for 2024. Monthly active users, a broader measure with a less direct and immediate impact on revenue, grew more rapidly, increasing around 30% on the PCP, and are running ahead of our 22% growth forecast for the full year. We maintain our revenue and earnings estimates despite stronger-than-expected growth in unpaid subscribers in the first three months of the year. Shares rallied on the update and now trade close to our unchanged AUD 14 fair value estimate.

We increase our fair value estimate for no-moat Life360 by 15% to AUD 14. The company plans to start advertising to free users, which we think will deliver a new, high-margin revenue stream. The shares rallied by more than a third on the day but remain materially undervalued.

We expect Life360 to primarily focus on continued investment in the improvement of user retention within its core Life360 product.

We initiate coverage on Life360 with a fair value estimate of AUD 12.15. We don’t believe Life360 has an economic moat. We forecast revenue to grow at a 10-year CAGR of 16% over the next decade and EBIT margins to expand to 24%. Furthermore, we use a weighted cost of capital of 9%. We assign Life360 a Morningstar Uncertainty Rating of Very High and rate its Capital Allocation as Exemplary. At current prices, Life360 screens as materially undervalued.

We expect Life360 to primarily focus on continued investment in the improvement of user retention within its core Life360 product.