Canadian fintech stocks such as Lightspeed Commerce (TSX:LSPD) and Nuvei (TSX:NVEI) have trailed the broader markets by a significant margin in the last 18 months. While Lightspeed stock is down 86% from all-time highs, Nuvei has declined by 75% from its record price.
But as investor sentiment improves, the two TSX stocks should stage a comeback and help you derive outsized gains over time.
Let’s see why.
The bull case for LSPD stock
Lightspeed offers a cloud-based commerce platform that empowers single and multi-location retailers and restaurants to engage with customers across digital and physical channels. It primarily targets SMEs (small and medium businesses) with its cost-effective portfolio of solutions.
A majority of the company’s revenue is recurring, and Lightspeed has successfully increased average revenue per customer in the last few years.
Valued at a market cap of $3.43 billion, Lightspeed Commerce reported revenue of US$730 million in fiscal 2023 (ended in March). So, LSPD stock is priced at almost four times forward sales, which is reasonable. At its peak, the TSX stock was priced at more than 30 times forward sales.
In fiscal 2023, Lightspeed’s transaction-based revenue rose 51% year over year to almost US$400 million, driven by increased customer adoption of its payment solutions.
Lightspeed remains unprofitable and reported an operating loss of over US$1 billion in fiscal 2023, up from US$318 million in fiscal 2022. The significant increase in its losses can be attributed to a non-cash goodwill impairment charge of US$748.7 million, which suggests the company previously paid a hefty premium to acquire other companies.
Analysts tracking LSPD stock expect its sales to surge by 22% to $1.18 billion in fiscal 2024 and by 30% to $1.53 billion in fiscal 2025. Comparatively, its earnings are forecast to improve to $0.37 per share in fiscal 2025, compared to a loss of $0.22 per share in 2023.
Bay Street forecasts LSPD stock to surge over 18% in the next 12 months.
The bull case for Nuvei stock
Nuvei offers a modular, flexible, and scalable technology platform enabling its customers to accept next-gen payments. It also provides services related to risk and fraud management, diversifying the revenue stream in the process.
Nuvei connects businesses with customers in more than 200 markets and 600 alternative payment methods. Valued at a market cap of $6 billion, Nuvei reported sales of $1.13 billion in 2022. It’s on track to end 2023 with revenue of $1.64 billion. Comparatively, Nuvei’s earnings are estimated to expand from $2.49 per share in 2022 to $2.82 per share in 2023.
In the first quarter (Q1) of 2023, Nuvei increased total payments volume by 45% year over year, while sales were up 20% at $256 million. The company also completed the acquisition of Paya, a prominent player in the payment technology space with strong positions in verticals such as global e-commerce, integrated payments, and business-to-business verticals.
It reported an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) was up just 5% at $96.3 million due to elevated inflation levels. But it still ended Q1 with an EBITDA margin of 38%, which is very healthy.
Priced at 15.4 times forward earnings, Nuvei stock is very cheap and trades at a discount of 60% to consensus price target estimates.
