5 reasons this booming ASX 200 tech stock is still a buy

Fundies and brokers alike are bullish on this stock.

| More on:
A man sits thoughtfully on the couch with a laptop on his lap.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Life360 Inc (ASX: 360) is one ASX 200 tech stock that's been turning heads in 2024. It is up more than 125% this year, outpacing the broader market by a wide margin.

Shares are currently swapping hands at $17.05 apiece, having retreated 5% over the past month.

Despite the short-term slip, analysts and fund managers continue to praise the ASX 200 tech stock. Here are 5 key reasons why experts think Life360 is still a compelling buy.

ASX 200 tech stock on a tear

Brokers and fundies alike are bullish on Life360.

Fund managers Surrey Asset Management and Firetrail Investments own the ASX 200 tech stock in two of their various investment funds.

These are the common factors that could drive the company higher, according to all three groups.

1. Revenue growth

One hallmark of ASX 200 tech stocks is the consistent revenue growth associated with their products.

Life360 notched up impressive growth numbers In its recent second-quarter update, booking a 23% increase in annualised monthly revenue (AMR) to US$304.8 million.

This growth is backed by its expanding user base of over 70 million active users for its family tracking app. Parents, carers, and now even pet owners use the technology to keep track of their loved ones.

Bell Potter is bullish on the company, maintaining a buy rating with a price target of $20.50 in a recent update.

This suggests a potential upside of 21% from current levels.

It noted the company's discussions on the "ample runway for subscription business in the US", along with a plan for 25% pre-tax margins.

2. Rapidly growing user base

The Life360 app now boasts over 70 million active users globally, and this number keeps climbing. The Surrey Australian Equities Fund sees this as a key advantage.

The fund returned 1% in August net of fees and recognised a 15% gain on its Life360 position. It said:

Our key attraction to Life360 includes features such as a rapidly growing global Monthly Active User (MAU) [and a] Very large Total Addressable Market…

Under a subscription model, the users generate recurring revenue. The more subscribers, the more recurring revenue.

3. Diversification into advertising

Life360 has branched out into advertising to leverage its extensive user network. The Firetrail Australian Small Companies Fund commented on the significance of this move in its August fund report.

…Life360 also announced the extension and enhancement of its partnership agreements with Placer.ai and Arity.

These strengthened collaborations highlight the increasing demand for Life360's real-time data and advertising initiatives.

The company is actively engaging with multiple prospective advertisers and potential partners. These strengthened collaborations highlight the increasing demand for Life360's real-time data and advertising initiatives.

The fund returned 0.3% net of fees last month, and has the ASX 200 tech stock in its top 3 holdings.

4. ASX 200 tech stock financials in check

Both Firetrail and Surrey commented on the company's Q2 numbers. The fund managers suggest it has the financial muscle to pursue growth opportunities and withstand market fluctuations.

Surrey Australian Equities Fund noted it is also attracted to the ASX 200 tech stock's "potential for profitable third-party advertising streams", alongside its "healthy balance sheet."

Meanwhile, Firetrail said the company "upgraded [its] full-year adjusted EBITDA guidance by 18% at the midpoint".

This is likely one reason it has exposure to "globally exposed growth companies such as Life360".

5. Analyst confidence

Life360 has garnered a wave of optimism from analysts. Aside from Bell Potter, Ord Minnett also rates the ASX 200 tech stock a buy.

Ord Minnett turned to the company's performance in various tech-related metrics in its Q2 2024 earnings results.

It said that Life360's "platform continues to strengthen amid improving unit economics", according to The Bull.

Meanwhile, according to CommSec, consensus rates it a buy as well. This is made up of 12 buys and two holds.

ASX 200 tech share final thoughts

Analysts and fund managers alike are bullish on this ASX 200 tech stock's outlook for the future.

Life360 stock is up 84% in the past year, resulting in a more than 72% advantage over the broad market.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Technology Shares

A young woman lifts her red glasses with one hand as she takes a closer look at news about interest rates rising and one expert's surprising recommendation as to which ASX shares to buy
Technology Shares

WiseTech share price higher on big news

This tech stock has found its new leader.

Read more »

Man holding a calculator with Australian dollar notes, symbolising dividends.
Technology Shares

$10,000 invested in DroneShield shares 5 years ago is now worth…

You might be laughing all the way to the bank if you had done this.

Read more »

Happy woman working on a laptop.
Technology Shares

Up 60% since April, why this $40 billion ASX 200 tech stock remains a 'compelling buy' today

A leading expert believes this $40 billion ASX 200 tech stock has a lengthy growth runway ahead of it yet.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Technology Shares

DroneShield shares sink 7% despite big news

Let's see what's going on with this market darling on Thursday.

Read more »

A man activates an arrow shooting up into a cloud sign on his iPad.
Technology Shares

Up 25% since April, is it too late to buy Xero shares today?

A leading expert gives his verdict on the growth outlook for Xero shares.

Read more »

Man looking at digital holograms of graphs, charts, and data.
Technology Shares

2 amazing ASX tech shares I wish I'd bought last year

These tech companies are among the world’s best companies.

Read more »

A man in a business suit and tie places three wooden blocks with the numbers 1, 2, and 3 on them on top of each other.
Broker Notes

3 reasons to buy this booming ASX All Ords tech stock today

A leading broker forecasts more gains to come from this surging ASX All Ords tech stock.

Read more »

Man ponders a receipt as he looks at his laptop.
Technology Shares

Brokers rerate 3 leading ASX 200 tech stocks

Experts reveal their ratings on the ASX 200 tech sector's three biggest companies.

Read more »