Lightspeed (TSX: LSPD) stock was among the pandemic darlings as COVID-led restrictions boosted demand for its digital products supporting omnichannel commerce.
However, a short seller report, easing restrictions, and normalization of demand amid a weak macro environment took a toll on the shares of this technology company, eroding all of its pandemic-driven gains.
Lightspeed stock has dropped over 86% since Spruce Point Capital Management provided a short sell report in September 2021. Moreover, it has decreased by over 20% over the past year. As Lightspeed stock has lost substantial value, let’s understand whether buying its shares near the current levels makes sense.
Ongoing digital shift to support Lightspeed stock
Lightspeed provides a cloud-based commerce platform and primarily offers point-of-sale (POS) solutions. Its flagship solutions include a unified hospitality and retail commerce offering. Additionally, it helps merchants expand their omnichannel presence via popular social media platforms and digital marketplaces.
Lightspeed acquired NuORDER, and once fully integrated, it will provide customers with enhanced supplier access and inventory visibility. Furthermore, the one-stop commerce platform will help merchants automate their manual ordering system and streamline omnichannel operations.
As Lightspeed facilitates multichannel commerce, the company stands to benefit from the ongoing digital transformation. The POS is well-positioned to gain as more retailers and restaurant operators upgrade their outdated payment systems. Additionally, any upturn in the economy will stimulate consumer discretionary spending, enabling small- and medium-sized businesses to expand their footprint and invest in technology. Consequently, this will drive increased demand for Lightspeed’s products.
Lightspeed is heading towards profitability
While the shift in selling models will support Lightspeed’s financials, the company will also benefit from the change in its go-to-market strategy to drive sustainable profitability. The company has streamlined its operations and focuses on a few core products targeting retailers, restaurateurs, and golf course operators.
Moreover, Lightspeed focuses on customers with high GTV (gross transaction value). In the first quarter of fiscal 2024, the company registered 10% growth in its customers with over $500K GTV. Moreover, customers with over $1 million in GTV increased by 11%. The strategy is helping the payment processor to increase its average revenue per user (20% growth in average revenue per user in Q1). Further, these high-value customers have the ability to adopt its multiple modules, enabling the company to drive organic revenues and reduce churn.
Investors should note that acquisitions are also a key part of Lightspeed’s strategy to drive its customer locations, broaden its product portfolio, and enhance its market share.
Bottom line
Lightspeed’s focus on streamlining its operations, enhanced go-to-market strategy, and growth in high-value customer base positions it well to deliver strong organic growth in the coming years. Also, its accretive acquisitions will drive its customer locations and strengthen its competitive positioning. While Lightspeed is poised to deliver solid growth, its stock is undervalued, providing an excellent buying opportunity. Shares of Lightspeed Commerce are trading at a next 12-month enterprise value-to-sales multiple of 1.5, which is near its all-time low, making it a compelling long-term pick near the current levels.
