Growth stocks such as Lightspeed POS (TSX:LSPD)(NYSE:LSPD) remain attractive to equity investors, as they provide you an opportunity to increase wealth at an exponential rate. These stocks have a high beta, which means they generally crush broader market returns over time. Alternatively, growth stocks might also grossly underperform indexes when markets turn bearish.
But every significant price drop should be viewed as a buying opportunity, allowing investors to purchase a quality stock at a lower multiple. Lightspeed POS went public on the TSX in early 2019 and has since returned 452% in just over two years. Its currently trading at record highs, and here’s why it may continue to deliver outsized gains in 2021 and beyond.
Stellar quarterly results
In the fiscal fourth quarter of 2021 ended in March, Lightspeed reported sales of US$82.4 million, which was an increase of 127% year over year. Its adjusted loss per share stood at US$0.09 in Q4, which was above consensus estimates of a loss of US$0.10 per share.
After accounting for acquisitions, LSPD’s organic revenue growth stood at a stellar 48% year over year in Q4. In fiscal 2021, LSPD sales were up 84% year over year at US$222 million compared to US$121 million in 2020.
Lightspeed is a cloud-based commerce platform that enables retailers and restaurants to manage operations, improve customer engagement, and accept payments. The company ended fiscal 2021 with a customer base of 140,000 compared to 76,500 in 2020.
Customer location additions were impacted in the first two months of fiscal Q4 in Europe due to lockdowns. However, Lightspeed experienced its best-ever month in terms of customer additions due to strong demand from several markets and an uptick in demand from the hospitality sector as pandemic restrictions were eased.
Lightspeed ended Q4 with a gross transaction volume of US$11 billion — an increase of 76% year over year. After accounting for the acquisitions of Shopkeep and Upserve, its GTV soared 25% to US$7.6 billion.
Key metrics for Lightspeed in 2021
Lightspeed Payments continued to gain traction in fiscal 2021. This business vertical also experienced its best-ever quarter, as revenue was up 300% year over year in Q4.
In Q4, Lightspeed’s software and payments sales rose 137% to US$75.3 million accounting for 91.4% of total revenue. Software and payment sales were up 48% on an organic basis.
In fiscal 2021, software and payments revenue rose to US$202 million compared to US$107 million in 2020. Subscription sales stood at US$119 million, or 54% of total revenue, and grew 51% compared to the year-ago period.
Further, the company’s transaction-based revenue, which represents LSPD’s payments business as well as the legacy payment referral-based revenue was US$83 million or 37% of sales and almost tripled year over year.
What’s next for LSPD and investors?
Analysts tracking LSPD stock expect sales to rise by 104% to US$452.66 million in fiscal 2022 and by 35% to US$611 million in fiscal 2023. While still unprofitable, Lightspeed’s adjusted loss per share is forecast to improve from US$1.16 in 2021 to US$0.4 in 2023. Lightspeed stock is trading at a steep forward price-to-sales multiple of 24.5, making it vulnerable in a broader market selloff. However, its focus on accretive acquisitions as well as a rapidly expanding addressable market and improving profit margins make it a top bet right now.
