We increase our fair value for no-moat Life 360 by 4% to $18.70, with full-year results. The company had a strong 2024, growing revenue at 22%, with international and advertising driving the result. The shares remain overvalued and are currently trading at $23.30.

International monthly active users increased nearly 50%, while international paid subscribers grew over a third. Moreover, growth in subscribers was despite average revenue per international paid subscriber growing strongly over the course of the year, as the company rolled out higher subscription tiers. Average revenue per international paid subscriber ended the year nearly double where it started, although still at less than half of the average in the US.

In-app advertising revenue, which Life 360 started during the year, also scaled rapidly. Other revenue, which includes advertising, grew by 41% to USD 36 million. This is especially impressive given the segment already had around USD 25 million in other revenue, mostly related to data sales, but only started selling in-app advertising space this year. Moreover, the exit run-rate for the fourth quarter implies another near 50% rise for 2025.

However, we think the market is over-extrapolating in-app advertising revenue and view the company’s shares are overvalued. As discussed in our Nov. 30, 2024 note: 'Life 360 Earnings: Impact From Advertising Will be Positive, but Limited,' we expect the number of use cases the company can service for advertisers to be limited.

Business strategy and outlook

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

Life360 has achieved impressive user retention, especially in the US on iOS, and we expect this to continue, especially beyond the US and on Android. First-month user retention in the US has reached 70% since 2021 from around 60% during 2018. By comparison, its international first-month retention reached only 45% by 2023 from around 30% during 2018. We believe international markets have a less safety-focused culture compared with the US, which could bring lower retention, but we expect further convergence of product features and offerings to result in more narrowing of the gap.

We also expect continued improvement in retention across all Life360 markets through the development of new features and offerings. We are especially optimistic about Life360's ability to improve paid-user acquisition and retention through bundled offerings with its Tile hardware, and we expect these trackers to be initially included in a subscription at cost or at a small loss to drive adoption. We also expect Life360 retention to improve through integration of its Jiobit wearables, which provide higher-quality tracking that will benefit from increased pet-humanization and helicopter-parenting trends.

Life360 bulls say

  • Life360 is the clear leader in family-focused networking, with industry-leading customer retention and engagement metrics.
  • Retention is likely to increase in the short term as international markets converge with the US market.
  • Retention rates are forecast to improve in the medium to long term because of continued expansion in features and offerings, especially from the integration of the Tile and Jiobit acquisitions

Life360 bears say

  • Life360 is currently unprofitable and has not yet proven that its business model can be profitable in the future.
  • Life360 faces formidable potential competitors in the mobile operating system operators and social-network companies.
  • Life360’s business is reliant on continued access to the mobile operating systems iOS and Android and may lose access to core functionalities.

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company's future cash flows, resulting from our analysts' independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn more about how to identify companies with an economic moat, read this article by Mark LaMonica.