Shares of Canada’s high growth tech stock Lightspeed (TSX:LSPD)(NYSE:LSPD) is trading at $43.35 per share. The stock has been extremely volatile in 2020 and has taken investors on a roller-coaster ride this year.
LSPD was trading at $46 per share at the start of 2020, and then fell to a record low of $10.5 as the broader indexes entered bear market territory due to COVID-19. While the markets recovered, Lightspeed made a stellar comeback, rising to 360% to trade at $48.3 at the start of September.
However, investors were concerned over sky-high valuations that resulted in a correction of 10% for LSPD last month. Let’s take a look at why the stock remains a top bet for growth investors despite the ongoing volatility.
LSPD offers a cloud-based platform
Lightspeed is a payment technology company and its cloud-based platform powers small and medium businesses (SMBs) all over the world. Its scalable point-of-sale systems and expanding portfolio of solutions helps restaurants and retailers manage operations, improve customer engagement, accept payments, and grow their business.
According to a research report from AMI Partners, there are 226 million SMB’s around the world that include 47 million retailers and restaurants that are potential LSPD customers. Comparatively, Lightspeed ended the July quarter with a customer base of 77,000, which means it has significant scope for customer acquisition and expansion.
The company already has a diverse base of customers and no single customer generates over 1% of total company sales. Further, over 33% of Lightspeed sales originate from outside North America. Lightspeed continues to expand its portfolio of solutions, which results in a positive net dollar retention rate.
It states, “We strive to continue adding new customer solutions and modules to our platform over time, including data-driven solutions, that will enable us to deepen relationships with existing customers and add new ones. We expect customers to adapt additional modules over time as their businesses grow, driving further incremental revenue for Lightspeed.”
LSPD remains optimistic about Lightspeed Payments, a payment processing solution introduced in early 2019. Lightspeed Payments is integrated with LSPD’s cloud-based platform and will enable it to monetize a significant portion of customer gross transaction value (GTV) that passes through its network.
Lightspeed sales rose 51% in fiscal Q2 of 2021
Lightspeed is one of the country’s fastest-growing companies. In its fiscal second quarter of 2021, LSPD reported sales of $36.2 million, up 51% year over year. Recurring software and payments revenue rose 57% to $33.4 million and accounted for 92% of total sales.
Due to its stellar growth, the company managed to narrow EBITDA loss to $2.2 million, compared with a loss of $5.1 million in the prior-year period. Its customer base experienced a quick recovery from April lows driven by increased digital sales as well as a rebound in physical sales.
In the last 12-month period, Lightspeed GTV stood at $23 billion. Analysts expect company sales to rise by 37% to $165 million in 2021 and 40% to $232 million in 2022.
The Foolish takeaway
Lightspeed’s market cap stands at $4.3 billion, indicating a forward price to sales multiple of 26. We can see the stock continues to trade at an expensive valuation which makes it vulnerable in a broader market sell-off.
However, given the company’s stellar growth prospects, every major correction should be viewed as a buying opportunity for long-term investors.
