Our 12-month target price of US$96.80 is derived by rolling forward our blended valuation of $87.80 at the cost of equity.

Our blended valuation is the average of:
1) DCF valuation of US$97.50, and 
2) SOTP valuation of US$78.10.

Our DCF valuation is derived using a WACC of 9.2%. We use a risk-free rate of 4.0% and a terminal growth rate of 5.0%.

Our SoTP valuation implies ~10.5x EV/Revenue multiple to our FY26e Revenue. We value the Life360 core subscription business at 12x EV/Revenue, which is more than double the multiple of peers to reflect the higher sales growth and margin potential, while we value the Hardware business at its acquisition cost, and we value the data and advertising business at 7.5x EV/Revenue, which is +50% premium to peers. 

We see the following risks to achieving our target price: i) higher-than-expected competition, especially from mobile platform players; ii) lower-than-expected conversion to paying users; iii) lower-than-expected customer acquisition and/or lower retention, especially in International markets; iv) brand reputation risk, including privacy concerns as Life360 looks to monetise location data indirectly; v) adoption of the new trackers is lower than expected; and vi)  increasing penetration of autonomous vehicles.

If the impact on the company for any of these factors proves to be greater than we anticipate, the stock will likely have difficulty achieving our financial and price targets. Conversely, if any of these factors proves to have less of an effect than we anticipate, the stock could outperform our target.

This stock is High Risk based upon our quantitative model, but assigning a High Risk rating is not supported by other qualitative factors such as Life360's market position, especially in the US where it has penetrated 15% of the addressable market. Further, Life360 has a strong balance sheet. Hence, a High Risk rating has not been applied.