From analysts to investors, everybody was touting Lightspeed POS Inc (TSX:LSPD) to become the next Shopify. After an impressive performance right out of the gates, the new tech company immediately drew comparisons with Canada’s blue-eyed tech baby Shopify. Lightspeed showed the most remarkable performance as a lucrative growth stock in recent years for many reasons.
Shopify is one of the most impressive stocks ever to be registered on the TSX. Investors who managed to get their hands on Shopify stocks early on are pleased with their decision.
Shopify’s shares themselves have a very high price now, making them inaccessible to many investors. Stocks like Shopify are tough to come by, but Lightspeed drew that kind of attention.
A leading tech stock, Lightspeed, climbed up to $48.61 in August 2019, but the price for this tech stock is down by a significant margin. Can we still consider Lightspeed the next Shopify? More important, should you consider adding this stock to your portfolio while the price is down?
Signs of struggles?
The company had one of the most successful IPOs of the year. Rising over 100% from the IPO price in the matter of a few months, Lightspeed beat the likes of Uber, which was a surprising disappointment.
After climbing up to impressive highs of $48.61 on August 9, 2019, Lightspeed POS shares took a dip to fall by 41.51% to $28.42 per share in just under two months.
LSPD didn’t just start with strong trading since the first day on the TSX. The company tore up the stock market after that. Climbing higher and higher, the company showed signs of becoming the next Shopify in 2019, where IPOs generally disappointed investors. The massive drop immediately saw LSPD recover, and the stock is trading at $32.77 at the time of writing.
Even at the lowest LSPD has reached in recent months, the stock was still way above the offering price.
Why did Lightspeed start faltering?
Shopify has been the primary reason for the rise and fall in share prices for LSPD. Just as the price of Shopify increased, so did Lightspeed share prices. Similarly, Shopify took Lightspeed down in August 2019, as the tech giant started to struggle at the same time. While both companies have separate niches in the tech industry, tech sector stocks tend to move up and down in tandem
Lightspeed tanking by such a high margin shouldn’t come as a surprise given the massive sell-off of Shopify stocks. Lightspeed’s year-over-year revenue growth averages at 36%, which is relatively stable. LSPD trades at around 30 times more than sales, which is problematic.
The year-over-year growth in revenue is reliable. Still, the valuation of 30 times the sales for the company also factors in the dip in share prices for LSPD.
If there are new IPOs launched by the company, investors expect the IPOs to run losses. I feel that the expectation is unjustified because Lightspeed has a substantial history before the IPO.
I believe that Lightspeed is still like Shopify, in both the good and bad aspects.
Right now, Lightspeed POS is a growing company with massive potential. The company’s stocks, however, are as expensive as Shopify, but offer weaker growth at the moment. I have high hopes from Lightspeed moving forward.
Investors who will not be phased by short-term volatility can consider adding LSPD to their portfolio. Lightspeed is a stock that can take off again, but time will tell how long it takes.
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 Adam Othman owns shares of Shopify. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Lightspeed POS Inc, Shopify, and Shopify. Shopify is a recommendation of Stock Advisor Canada.