Life360 operates a platform that offers tracking of family members via location coordination and safety alerts, driving alerts, digital safety alerts, and emergency assistance alerts. Life360, which also sells the Tile hardware tracking devices, is based in San Francisco, has circa 51 million monthly active users, and operates in more than 150 countries. We initiate on Life360 with a Buy recommendation and $8.84 per share price target.
Our positive view is supported by (1) the company’s performance in FY23: with ~40% revenue growth delivered YTD despite an aggressive cost reduction program – as these pressures now ease, we see meaningful free cash flow generation beginning (or a re-acceleration of growth), (2) bundling: which looks like a paradigm shift for customer retention, and (3) lapping of Tile integration: which allows 360 to shift focus to improving its core offering. The recent sell-off post 3Q23 results provides an attractive entry point, with 360 trading at an enterprise value to revenue multiple of just 2.6x.