Why Lightspeed Stock Surged 5% Wednesday

Here’s the key reason why Lightspeed Commerce (TSX:LSPD)(NYSE:LSPD) stock surged more than 5% on Wednesday, September 22.

Jitendra Parashar

Author Bio Jitendra Parashar is a financial journalist who has been writing for The Motley Fool Canada since June 2020. With more than 13 years of experience in financial journalism, equity research, and market analysis, he helps investors understand market developments and identify long-term investment opportunities. Before joining The Motley Fool Canada, Jitendra spent several years at Market Realist covering U.S. equities, major economic developments, and developments in the automotive and technology industries. He also worked in commodity and currency research at brokerage firms, gaining insight into how economic trends, central bank decisions, and geopolitical events influence financial markets. Jitendra writes for beginner investors, dividend seekers, and Canadians looking to build wealth over the long term. He also contributes to the daily TSX Today series, explaining key Canadian market developments and highlighting news investors should watch. Based in India, Jitendra follows Canadian and U.S. markets closely. Outside of work, he enjoys travelling in the Himalayas, street and nature photography, and exploring programming and artificial intelligence. Education MBA in Finance and International Business Bachelor's degree in Journalism Areas of Expertise Canadian and U.S. financial markets, long-term equity investing, dividend investing, macroeconomic and geopolitical trends, automotive stocks, emerging technologies, and artificial intelligence. Social Media Profiles LinkedIn Muck Rack Favorite Investment Quote “Simplicity is the master key to financial success.” — John C. Bogle

Published September 22, 2021 1:10 pm EDT

What happened?

Lightspeed Commerce (TSX: LSPD)(NYSE: LSPD) stock surged by more than 5% today. With this, LSPD stock reached above $165 per share this morning to trade with solid 85% year-to-date gains. By comparison, the key Canadian market benchmark TSX Composite Index has risen by only 17.2% this year so far.

So what?

Lightspeed is a Montréal-based enterprise software firm. It primarily focuses on providing omnichannel commerce-enabling software solutions to businesses.

LSPD has been one of the top-performing Canadian tech stocks this year. A couple of days ago, analysts at CIBC raised their price target on LSPD stock to $195 per share from $155 earlier. CIBC’s updated price target reflected nearly 25% upside potential from its then-market price of around $155 per share.

Despite this recent upgrade, Lightspeed shares fell by nearly 2.2% on Monday and remained mixed yesterday. The broader market selloff — triggered by China’s Evergrande debt crisis — mainly pressurized all Canadian tech stocks, including Lightspeed. Nonetheless, the stock jumped up sharply today after investors’ fears about a potential collapse of Evergrande are seemingly subsiding.

Now what?

Lightspeed stock has consistently been trading on a positive note for the last six months in a row. Despite the COVID-19-related challenges, the company posted a solid 84% jump in its 2020 sales, while its adjusted gross profit rose by more than 64% from a year ago. This strong financial growth drove LSPD stock up by 149% last year.

Its growth trend accelerated further, as reopening economies boosted the demand for its e-commerce solutions — especially from small- and medium-sized businesses. That’s one of the reasons why in the June quarter, Lightspeed’s revenue growth accelerated to a massive 220% year over year, as its gross transaction volume surged by 203%.

I expect the demand for Lightspeed’s software solutions to accelerate further, as more businesses than ever are trying to build or improve their online presence in the post-pandemic world. Given this solid demand, consistently improving financials, and solid long-term fundamentals, Lightspeed stock could still be a great buy for long-term investors who want to buy some high-growth Canadian stocks.