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.

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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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool owns shares of and recommends Lightspeed POS Inc. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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