300% Gains in Life360…Should You Buy in?

I was recently introduced to the Life360 app, which is designed for family and friends to share their location. One of the cool features about this app is that it allows you to track family members including how fast they are driving and to call for assistance if someone is in an accident. While the app is free, it also has some additional features, which subscribers can pay for. When I investigated this company, I found it was headquartered in San Francisco but it had listed on the Australian Securities Exchange (ASX) in May 2019.

300 per cent gains... should you buy in?

During the IPO, it raised $112.7 million by issuing 23.5 million new chess depositary interests (CDI’s) at $4.79 each, as CDI’s allow a non-Australian company to list their shares on the ASX. The company began trading on 10 May 2019 but like most IPO’s, it traded down in price and by 23 March 2020 it had fallen over 70 per cent to $1.51.

Over the last 12 months, however, Life360 has achieved 20 per cent revenue growth year on year despite COVID-19, which has seen its share price rise over 300 per cent to a new all-time high last week of $6.49 with many analysts promoting the stock as a strong buy. While I like the look of this stock and believe it has the potential to rise further, I think most of the rise has already occurred, at least in the short term.

That said, over the longer-term this stock looks attractive, as it is in the technology sector and has a broad international client base paying monthly fees, so subscribers can have peace of mind not only knowing where their loved ones are but that they are safe, which means their likely to be very loyal long-term users.

What were the best and worst performing sectors last week?

The best performing sector include Information Technology up 6.96 per cent as Altium rose over 28 per cent on news it rejected a $5 billion takeover bid from US technology company Autodesk with Altium stating that the offer price of $38.50 undervalued the company. There were also merger rumours about IRESS, which resulted in it rising over 20 per cent last week.

 Utilities was also up 2.89 per cent followed by Healthcare up 1.92 per cent. The worst performing sectors included Financials down 1.92 per cent, Consumer Staples down 1.01 per cent and Consumer Discretionary down 0.78 per cent for the week

The best performers in the ASX/S&P top 100 stocks include Altium up 28.63 per cent followed by Appen up 13.15 per cent and Afterpay up 9.57 per cent. The worst performing stocks included The Star Entertainment Group down 4.53 per cent, followed by Bendigo Adelaide Bank down 4.13 per cent and Worley down 4.08 per cent.

What's next for the Australian share market?

After two weeks of solid gains, the rise on the All Ordinaries Index slowed last week with the index closing in the red down 0.97 percent. The market rose to a high of 7,593 points last week and is getting close to my target of 7,600 points that I mentioned in previous reports. While it is possible the All Ordinaries Index could trade higher, it would be better to prepare for the market to fall away anytime soon.

While a number of technology stocks were hot last week, I would caution investors making any quick decisions based on news and speculation, as this type of investing can be very fickle. For example, last week Appen traded up 13 per cent, however, investors who were buying in on the back of last week’s rise need to remember that two weeks ago Appen was down around 9 per cent and its total gain over the past three weeks is only 5 per cent.

So where will the market go from here? Despite the Australian stock market trading up last week, it was far from convincing and is overdue for a pullback, which I now believe will be in the vicinity of 8 to 12 per cent. As it stands, the risk of buying into the market just before it falls away is increasing and investors would be wise to exercise caution.

For now, good luck and good trading.

Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.