Company Interview / Two under pressure tech stocks presenting an opportunity

Key points:

Zip Co (ASX:ZIP) and Life360 (ASX:360) experience significant share price falls despite upgraded guidance Both companies deliver strong earnings updates and see uplift in consensus forecasts Market rotation and rate hike fears cited as reasons for recent volatility Eiger Capital focuses on long-term, structural growth opportunities in current conditions

Shares of former market darlings Zip Co (ASX:ZIP) and Life360 (ASX:360) have experienced significant declines of around 40% since early October, despite both companies recently upgrading their guidance. Rachel Thomson of Eiger Capital expresses surprise at the share price falls, noting that both companies reported strong quarterly updates. Zip Co raised its outlook for total transaction volume growth from 35% to 40% for the year, while Life360 uplifted its EBITDA and revenue forecasts by a modest amount. Consensus expectations for both companies’ earnings have also moved upwards post-updates, making the market’s reaction puzzling for Thomson.

Thomson points to a broader sentiment-driven rotation in the market as a primary factor, particularly as concerns over interest rate hikes and consumer sentiment impact high-growth, high-valuation stocks. She highlights Life360’s expansion into adtech with a $120 million acquisition, the launch of a new pet-focused service targeting US households, and Zip's continued momentum during Cyber Week. Thomson sees both companies as attractive structural long-term growth opportunities at current valuations.

Eiger Capital applies a bottom-up investment approach, seeking value and structural growth stories such as Zip Co and Life360, regardless of fluctuating interest rate environments. Thomson argues these companies’ customer bases are relatively insulated from interest rate changes, with spending and adoption momentum continuing.