There’s plenty of attention given to the tech space within the stock market, but that attention seems to focus on only a few companies. Shopify and BlackBerry are two such examples that analysts and investors seem to remain zeroed in on, but there are other opportunities out there with stock prices that remain well undervalued.
One such example is Lightspeed POS Inc. (TSX:LSPD), a point-of-sale (POS) company that develops integrated e-commerce, hospitality and supply chain management ecosystems. But what’s getting some investors talking is that this stock has been on an incredible rise lately.
The stock has only been around for a couple of months, but in that time, the company risen more than 120%, and analysts believe that it’s undervalued. So let’s take a look at what’s making investors turn their attention away from Shopify in favour of Lightspeed.
Not the only one
The rise of e-commerce in the last few years has created an opportunity for POS companies like Shopify. POS systems are needed worldwide to provide safety and security for both customers and merchants who are providing personal and financial information on the internet — something that even a decade ago made many retailers very uncomfortable.
Since then, they have become a necessity, making them a lucrative product that’s been growing on a massive scale. Looking at Lightspeed, this has absolutely been the case. The company is being used in 100 countries, with revenue growing 36% year over year to $21 million in its recent quarter.
Speaking of earnings, this company is now set up to make a killing. With no debt, Lightspeed is just collecting cash, with analysts predicting it will deliver a fiscal 2020 revenue of up to $110 million. This comes from the company’s phenomenal earnings, as I mentioned earlier. And it’s not just a one-time thing, as recurring revenue grew 34%, making about 90% of its revenue coming from recurring sources.
Can it keep up?
It’s all well and good to paint a rosy outlook for a new company, but can Lightspeed maintain its amazing momentum? Many analysts believe that’s a yes given that its user base has grown impressively, as have its transactions as the company focuses in on the medium-sized enterprise space.
Where Lightspeed could really benefit from is bringing together this fragmented space, making users come back despite its premium pricing. As I mentioned, the company has no debt and a boatload of cash to work with, so acquisitions in the future look like a real possibility. Honestly, it will have to do this if it’s going to take up more of the market share and take on its competitors.
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There’s lots of opportunity to be had with a company like Lightspeed. To be honest, at this point, with so much cash, the world is its oyster. For investors looking to find the next Shopify, I’m not sure yet whether Lightspeed is your stock. However, while the stock might not turn from $40 to $400 overnight, it certainly has a lot of growth ahead that could see investors making some serious capital gains over the next few years.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of BlackBerry, Shopify, and Shopify. Shopify and BlackBerry are recommendations of Stock Advisor Canada.