1 Plunging Canadian Stock I’m Not Selling!

Lightspeed Commerce (TSX:LSPD)(NYSE:LSPD) is down more than 40% below all-time highs. Here’s why I’m far from selling my shares.

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It’s been a wild ride for Lightspeed Commerce (TSX:LSPD)(NYSE:LSPD) shareholders over the past two months. 

A short report in September sent shares spiralling more than 20%. And just when the stock began to recover, it tanked another 30%. The company’s Q2 earnings report that was released in early November was not well received by investors. 

As of today’s stock price, the tech stock is down close to 50% from all-time highs set two months ago. Even with the recent sell-off, though, Lightspeed is still one of the more expensive tech stocks on the TSX. It’s valued at a frothy price-to-sales ratio of 20 right now. 

My focus remains on Lightspeed’s long-term growth potential

Spruce Point Capital Management was the firm that released the short report in September. The report contained serious allegations of Lightspeed inflating key metrics, including gross transaction volume and total addressable market.

The report went on to caution investors with a potential 60% to 80% long-term downside risk to Lightspeed stock. The research firm suggested that losing out to competitors, such as Amazon and Shopify, would severely impact the growth projections that Lightspeed management has set for the company.

This isn’t the first bearish report that Spruce Point Capital Management has released and I don’t think it will be the last. It’s also not all that unusual for a high-growth tech company to be attacked with these types of accusations. 

I don’t believe that Lightspeed management has given any reason to doubt their integrity while acting as a public company, which is why I’m not at all concerned about this report.

If you’re a long-term investor who’s bullish on the growth of e-commerce, you can thank Spruce Point Capital Management for this buying opportunity.

Revenue growth of 193% was not enough to impress investors

Lightspeed reported its 2022 fiscal year Q2 earnings in early November. Even though year-over-year quarterly revenue growth was just shy of 200%, the growth stock still managed to plummet nearly 30% following the release of the earnings report. 

Rather than revenue growth, investors seemed to have been more focused on the company’s losses that came in higher than expected. Lightspeed’s adjusted EBITDA net loss for the quarter was more than 200% higher than the previous year.

While a bigger than expected loss may have spooked some investors, I remain very bullish on Lightspeed’s long-term growth strategy.  

Management is committed to reinvesting aggressively into the business to keep revenue growth soaring. The company is using its capital to grow its product line and expand internationally both organically and through acquisitions. 

Short-term investors should be investing cautiously

The recent volatility over the past couple of months proves why having a long-term time horizon is crucial when it comes to investing, especially when it comes to growth stocks. When a stock is valued as richly as Lightspeed, volatility should be expected. 

As a current Lightspeed shareholder, I’m not hoping for another 30% drop anytime soon. That said, I’m certainly prepared for one. My long-term time horizon lets me take advantage of these opportunistic sell-offs.

If you’ve had this tech stock on your watch list, don’t let the recent sell-offs stop you from starting a position. You’ll be thanking yourself in a few years for picking up shares at this discounted price.

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.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Nicholas Dobroruka owns shares of Lightspeed POS Inc and Shopify. The Motley Fool owns shares of and recommends Shopify. The Motley Fool recommends Amazon and Lightspeed POS Inc.

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