Down 32% in 2022, this ASX All Ords share is a bargain-buy opportunity: WAM

There are plenty of All Ordinaries (ASX: XAO) shares that have plunged in 2022. But, with all of this pain, some investors are going bargain-hunting.

Fund manager Wilson Asset Management (WAM) has picked out the Life360 Inc (ASX: 360) share price as an opportunity.

Like many ASX tech shares, Life360 has been hit by lower investor sentiment, at least about its valuation.

In 2022 to date, the Life360 share price has dropped by around a third. In other words, it has dropped by around 33% since the beginning of the year.

What is Life360?

WAM described the ASX share as a market-leading information technology company providing location-based services, including sharing and notifications, allowing families to communicate and keep track of the people they care about.

The fund manager noted that Life360 has 42 million active monthly users.

WAM said the ASX tech share is a position in multiple portfolios: WAM Capital Limited (ASX: WAM) and WAM Active Limited (ASX: WAA). Both of these are listed investment companies (LICs).

Why does WAM like this All Ords ASX share?

The fund manager said the business has a clear marketing strategy for expansion and monetising its suite of products.

WAM explained that it’s attracted to the Life360 share price due to the customer value proposition in the current inflationary environment.

The business had been “delivering greater value to its customer base”, but it recently announced it was going to increase prices for its core mobile application by approximately 50%.

The fund manager pointed out that initial testing suggests the change “will have less than a 10% impact on customer retention, clearly demonstrating the strength of the company’s pricing power”.

Another element of the All Ords ASX share that WAM likes is the addition of more services. It wrote:

Life360 is building out a platform of location and protection orientated products. Following the acquisition of Tile, a tracking device that helps locate misplaced items, Life360 will look to bundle the Tile hardware solution in with its own premium tier plans. In our view, this will improve customer retention, increase revenue per customer and lead to margin expansion over time.

We remain positive on Life360 and confident in its strategic plan for growth.

Is the business still growing?

In the first half of FY22, it reported that subscription revenue was up 90%, and up 60% for core Life360 subscriptions.

In terms of its guidance, Life360 said the monthly pricing change isn’t expected to impact subscription revenue much in 2022.

However, a more significant positive impact on subscription revenue (along with the impact on subscriber churn) from the price increase is expected in 2023 and beyond.

While hardware revenue has “stabilised”, the ASX All Ords share said it has limited visibility into the “critical” fourth-quarter holiday season.

It will update its guidance as part of the third-quarter earnings release on 15 November 2022.

Despite falling heavily in 2022, the Life360 share price is up by almost 30% in the last month.

The post Down 32% in 2022, this ASX All Ords share is a bargain-buy opportunity: WAM appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison 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, Inc. 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.

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