Why Lightspeed Commerce Stock Plunged 17% in December

The recent drop in Lightspeed stock presents a great opportunity for long-term investors who want to buy cheap, high-growth stocks.

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What happened?

In December, Lightspeed Commerce’s (TSX:LSPD)(NYSE:LSPD) stock price tanked by nearly 17% to around $54 per share, extending its Q4 losses to about 56%. By comparison, the TSX Composite Index inched up by 6% during the fourth quarter. Meanwhile, other Canadian tech stocks like Shopify and Descartes Systems rose by 8% and 2%, respectively, in Q4.

So what?

Notably, December was the fourth consecutive month when LSPD stock continued to post sharp losses. The ongoing selloff in Lightspeed stock mainly started on September 29 when a New York-based short-seller, Spruce Point Capital, released its critical report.

In its report, the short-seller made several allegations against the Canadian commerce tech firm’s financial reporting practices and raised questions about its organic growth. The short report also suggested that Lightspeed’s management has been inflating its business metrics apart from overstating its customer count and gross transaction volume.

Soon after Spruce Point made these allegations, several independent law firms jumped into the picture to investigate the matter on investors’ behalf. However, none of these independent law firms so far has claimed to have found any evidence against Lightspeed to verify the short-seller’s allegations. Despite the lack of clear evidence, the short report certainly badly hurt investors’ sentiment, triggering a massive selloff in LSPD stock.

This is one of the key reasons why Lightspeed stock, which was trading with 15% year-to-date gains at the end of August, has now lost 40% in 2021.

Now what?

With its consistently expanding business presence, I expect Lightspeed’s overall financial growth to accelerate further in the coming years. To accelerate the pace of its financial growth, the company’s management is actively pursuing new partnerships. For example, the Canadian online department store company The Bay partnered with NuORDER by Lightspeed on December 7 with an aim to “further accelerate its digital-first transformation.” Similarly, LSPD announced a multi-year agreement with Golf Canada in mid-December, extending its golf customers list.

As I’ve highlighted in one of my recent articles, most Street analysts seemed to have ignored the recent short report and remain optimistic about Lightspeed’s future growth potential. With this, analysts see about 140% upside potential in LSPD stock in the next 12 months with a consensus target price of around $123 per share.

Given all these positive factors, I expect the stock to stage a sharp recovery in 2022. That’s why the recent drop in Lightspeed stock presents a great opportunity for long-term investors who want to invest in cheap high-growth 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 and recommends Shopify. The Motley Fool recommends Lightspeed Commerce. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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