Lightspeed POS (TSX: LSPD)(NYSE: LSPD) has been one of the hottest stocks to own in 2020. Despite the challenges the company’s retail and hospitality customers have faced due to the COVID-19 pandemic, Lightspeed shares are in high demand, up more than 140% this year. The reason investors are flocking to the stock is because of its impressive growth. In fiscal 2020, sales of US$121 million grew 57% from the previous year. And that was a higher growth rate than in fiscal 2019 when sales of US$77 million were only up 35%.
Although profits remain elusive for the business, Lightspeed is still doing a great job of growing, which is what often captures a lot of bullishness in the markets. And for early investors, that’s led to some terrific gains since the company first started trading back in March 2019. If you were to invest in the company when it first opened and was trading at around $18, you could have made a great return if you were to hang on until now. With a $10,000 investment, you would have been able to buy about 555 shares of Lightspeed on its initial day of trading.
Today, those shares would be more than $48,000
Trading at a stock price of around $87, Lightspeed’s stock has been on fire, soaring more than 360% since it went public, outperforming the TSX and S&P 500 by wide margins:
LSPD data by YCharts.
Surprisingly enough, much of the surge has come this year amid the pandemic with businesses struggling. But with a strong customer base and recurring revenue, Lightspeed’s operations have proven to be resilient, at least for now. In its most recent quarterly results, the company’s sales of US$46 million grew at a rate of 62% from the prior-year period (42% if you exclude the growth due to the acquisitions of Gastrofix and Kounta). On Nov. 25, Lightspeed announced it closed its acquisition of ShopKeep, which is a cloud commerce platform based out of the U.S. that will help boost the company’s sales even further next year.
Is Lightspeed still a good buy?
The Canadian tech stock has been a great investment since going public, but what matters now is whether the stock is still a good buy moving forward. There are more than 100,000 customer locations that Lightspeed serves today through its cloud-based point-of-sale system. That’s nearly double the 57,000 locations it served in November 2019, a little more than a year ago. But the problem is whether the business can continue growing at that pace, and that’s the big question mark out there right now. Economies around the world are struggling, people are out of work, and cutting down on costs is going to be imperative for businesses moving forward. The situation for the hospitality and restaurant industries may improve over the next 12 months, but whether it will be enough to generate the strong growth Lightspeed investors have been used to recently remains a big unknown.
As well as the company’s done, there’s just too much risk right now to assume that Lightspeed’s stock can offer a repeat performance in 2021. If you’ve profited and made a great return from owning the stock, now may be a good time to consider selling as there could be a rough road ahead for the company in the near future.
