Small Caps | Aug 01 2019
Smart phone technology company, Life 360, has performed strongly in the first half and brokers are impressed with the outlook.
-Presents compelling value, given sales forecasts
-Strong execution in monetising the user base
-Further features in the pipeline to enhance the value offer
By Eva Brocklehurst
Business momentum continues for technology company Life360 Inc ((360)) as a record number of users were added in the first half. The company has a globally recognised application (app), whereby families can locate children and connect with them at any point in time via their smart phone, with a significant market opportunity.
The rate of US user acquisition was the highest ever for a six-month period in the first half. Moelis is impressed with this, as the second half of the year is typically stronger because of the timing of school holidays in the northern hemisphere.
Moelis reiterates a Buy rating and US$6.55 target, assessing the stock is presenting compelling value with an enterprise value of 4.2x 2020 sales forecasts. The broker suggests the company is just at the beginning of its monetisation opportunity and further progress on initiatives will be a catalyst for the share price.
Average revenue per "paying circle" in the first half was up by mid single digit percentage points compared with flat prospectus forecasts. Paying circles allow users to create separate groups within the app such as caregivers or extended family. The user's location is only visible to those within the circle.
Revenue was up 114%, representing strong execution in monetising the user base through paying subscriptions. Credit Suisse considers the June update a high quality report as the core subscription businesses are outperforming. While finding comparable companies is challenging, the broker continues to believe the stock screens very attractively in terms of revenue multiples and reiterates an Outperform rating and $5.20 target.
Management remains comfortable with prospectus forecasts for revenue of US$58.6m in 2019. Monthly active users were up 4.6m over the first half and total monthly active users ended the month at 23.1m. Full year revenue guidance is achievable, Credit Suisse asserts, and will be a key catalyst to drive a re-rating. Revenue from the sale of anonymous data is the largest component of the company's indirect revenue and the broker forecasts US$5m in the second half.