Life360 Inc (360) $15.46

For subscribers who are not familiar with 360, it’s a $3.2bn ASX-listed US tech company based in San Francisco, California. Their product is the no.1 family safety and location-sharing app globally with +66 million active users, making it the 5th-ranked US Social Networking App in terms of Daily Average Users (DAU) – an impressive 1 in 8 US families use the app. It has also now become the no.15 overall US App in terms of DAU, which is no mean feat.

• In April, they reported 4.9 million new users for the first quarter, while there are only 96,000 paying users at this stage.
• The company is starting to run advertising as the various revenue levers start to be pulled.

The stock re-rating after its result earlier this year was dramatic, and with so many users, the levers it can pull to drive revenue are significant and exciting. Revenue is estimated to be ~$370mn this FY, but this could be dwarfed in years to come with some on-point execution as they head towards their long-term goals of 150m monthly active users, $1b of revenue, and 25% EBITDA margins

• Share price gains for Software as a Service (SaaS) businesses that swing from cash burn to cash generation can be very significant.

Whether it is parents keen to track their children or people/businesses looking to know the location of cars, boats, etc, demand is clearly increasing. This week saw 360 announce plans to dual list on both the ASX and NASDAQ; according to terms sent to investors, the stock will IPO in the US, raising no more than $US100mn with the funds to be used for “general corporate purposes”, overall a logical step for a company with big global ambitions.

While the risks are real that another large US tech company could try to muscle its way into 360’s market, it would arguably be cheaper and easier for them to buy 360; hence, we aren’t too concerned here.

• We like the risk/reward towards Life360 back below $14, not out of the question for this volatile stock.
• We can see ourselves covering 360 further through 2024 and potentially owning the stock.