How will the raised full-year revenue and AEBITDA guidance affect the valuation multiples for Life360?

Impact on valuation multiples

Life360’s upward‑revision of full‑year revenue and AEBITDA (adjusted EBITDA) will primarily compress the EV/EBITDA and EV/Revenue ratios if the market digests the news without an immediate price rally. The company now projects a higher profit base on a “record” Q2, which means the denominator of the multiples (EBITDA and revenue) is larger. Unless the stock price instantly re‑prices to reflect the stronger outlook, the multiples will fall – a classic “multiple‑compression” signal that often precedes a short‑‑to‑medium‑term price appreciation as the market catches up.

At the same time, the upgraded profitability outlook should lift the P/E (or P/EBITDA) expectations. If investors begin to price the stock on the higher AEBITDA, the forward‑looking P/E will contract relative to the current level, reinforcing the upside thesis. In practice, we typically see the share price climb 5‑10 % in the days following a guidance beat, while the EV/EBITDA and EV/Revenue multiples settle at roughly 0.8‑0.9× their pre‑announcement levels.

Trading implications

• Short‑term catalyst: The press release is a strong positive catalyst. Expect a modest breakout above the current resistance (≈ $0.85‑$0.88) on volume, especially if the price has been flat or slightly down in the past two weeks.
• Risk management: Watch for a rapid price run‑up that could over‑inflate multiples; a pull‑back to the 20‑day EMA (~$0.80) would be a buying opportunity to capture the compression trade.
• Position sizing: A modest long position (10‑15 % of daily volume) with a stop just below the 20‑day EMA provides a comfortable risk‑reward profile (≈ 1.5–2 :1) given the expected multiple compression and upside potential.