Is Lightspeed (TSX:LSPD) Stock Headed to $50 Per Share?

The way Lightspeed stock has been falling lately, the possibility of it dropping to $50 per share can’t be denied completely. But…

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Lightspeed Commerce (TSX:LSPD)(NYSE:LSPD) stock is continuing to tank for the third consecutive month. After diving by 25% in the first week of November, LSPD stock extended its losses by another 4% last week. With this, it’s currently trading at $87.40 per share — down about 45% from its mid-September price levels near $158 per share. Let’s take a closer look at what could be driving these massive losses in Lightspeed stock lately and explore whether these negative factors could drive it down towards $50-per-share levels.

Lightspeed stock continues to fall

Lightspeed stock has been one of the top-performing Canadian stocks since its listing on the TSX in 2019. While the stock rose by 149% last year, it was trading with solid 56% year-to-date gains at the end of August 2021. However, a New York-based short-seller’s critical report about the company’s management took a big toll on investors’ sentiments in September, driving a massive selloff in LSPD stock.

While its shares staged a good recovery in the weeks ahead of its September quarter earnings event, they fell again sharply after the earnings event. In the second quarter of its fiscal year 2022, Lightspeed’s revenue more than doubled from a year ago to US$133.2 million, beating analysts’ expectations by nearly 8%. Similarly, its adjusted net loss of US$0.08 per share for the quarter stood 12% lower than the estimates.

Despite its consistently strengthening sales and narrower-than-expected losses, the company’s disappointing Q3 sales guidance hurt investors’ confidence. The management expects its third-quarter revenue to be in the range of US$140 million and US$145 million. This revenue guidance range was slightly lower compared to Street analysts’ expectations at the time, which explains why Lightspeed stock slid sharply after its latest earnings event.

Could LSPD stock fall to $50 per share?

Could LSPD stock fall to $50 per share on the TSX in the coming months? The way it has consistently been falling lately, the possibility of it dropping to $50 per share can’t be denied completely. But does it really deserve to drop to $50 per share? The answer to that question is a clear no, in my opinion.

Lightspeed’s management has on several occasions denied allegations made in the recent short report. In fact, several law firms started investigating the allegations made in the short report. And none of them have claimed to have found any evidence against Lightspeed so far. During its Q3 earnings conference call, its CEO Dax Dasilva reiterated that the report “…was misleading and clearly intended to benefit the author.” He added that “Lightspeed has made a genuine and consistent effort to establish a trusted and transparent relationship with the investor community.”

On the fundamental side, Lightspeed’s operating metrics continue to showcase strength. While its short-term sales guidance might be slightly lower than Street’s estimates, its solid long-term growth prospects remain intact. These factors could trigger a sharp recovery in LSPD stock in the coming months. That’s why long-term investors may want to consider buying it right now and add more shares if it falls further in the short term.

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 recommends Lightspeed POS Inc. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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