Lightspeed POS (TSX:LSPD)(NYSE:LSPD) stock is trading at $70, a 33% discount from its all-time high. This might be your last chance to buy this stock at such an attractive price. The company will release its fiscal 2021 fourth-quarter earnings on May 20. The thing with earnings is that investors price in their bearish expectations on seasonally weak earnings. But once the earnings report is out, investors price-in the outlook the CEO provides.
What to expect from Lightspeed on May 20?
Lightspeed has a history of beating its estimates as it keeps acquiring new companies. For the fourth quarter, it expects revenue to surge 93% year over year (YoY) to $70 million, including the revenue of ShopKeep and Upserve. It might meet or slightly exceed this estimate.
But the showstopper would be the outlook for the first quarter of fiscal 2021. There are many positive for the quarter. First, Lightspeed will include the revenue from its latest acquisition, Vend, in the first quarter of fiscal 2022.
Second, the third wave of the pandemic re-imposed lockdown in many cities of Europe and Canada in April, whereas the United Kingdom eased the lockdown as it found some relief from the pandemic. Lightspeed tapped this opportunity and introduced Lightspeed payments for the U.K. hospitality sector as restaurants reopened in April.
Third, the quarter will see the start of a recovery in the hospitality sector, which accounts for 52% of Lightspeed’s revenue. As for the retail sector, the growth will likely normalize.
Lightspeed stock’s valuation
In the fiscal 2021 third quarter, Lightspeed’s revenue growth excluding acquisitions was 52.6% YoY. At that time, its stock was trading at 52 times its sales per share. As the organic revenue growth surges in the coming months, the stock price could surge to maintain the price-to-sale ratio of 52. This is just the first-quarter outlook. The year has a lot more in store.
What fiscal 2022 has in store for Lightspeed?
Last year, Lightspeed’s net loss widened due to the acquisitions and accelerated innovations it undertook in the light of the pandemic. Now it is time to reap the rewards.
Lightspeed is expanding its Supplier Network to accelerate its platform uptake among retailers. The company has also started working on Lightspeed Capital that offers loans to small businesses. The year will see rising penetration of Lightspeed Payments. These merchant solutions will increase its average revenue per user (ARPU).
As the ARPU increases, Lightspeed’s gross transaction volume (GTV) will have a higher impact on its revenue and lead the way to profitability. Lightspeed will cross-sell its merchant solutions to the customers it acquired from the recent acquisitions. While all this will accelerate its revenue growth, it will also increase the revenue seasonality.
Buy the dip
If you look at Lightspeed stock’s 2019 movement, it surged 112% between May 24 and August 9. While I don’t claim the share will repeat this growth, this is probably your last chance to buy the stock at a $70 price. The share will rally as seasonality and recovery in hospitality seeps in. Any future correction in the stock price might be above the $70 price.