There are quite a few stocks out there finally making a recovery on the TSX today. And that seems to only be getting better. The Federal Reserve has stated it looks unlikely that there will be any more interest rate hikes as long as inflation falls. That should remain true coming from the Bank of Canada as well. So, what does that have to do with Lightspeed Commerce (TSX:LSPD)?
A bull market is coming
After an economic downturn, a bull market arrives and usually arrives strong. Given that we’ve had a soft landing (most likely), investors have remained very interested in getting back into the market. They continue to look for growth stocks, likely looking back on what did well over the last few years.
One of those stocks was Lightspeed stock. The company surged to nearly $160 per share during the peak of tech stocks and e-commerce. However, it was then hit over and over by first a short-seller report, then the drop in the tech sector, and a drop in consumer products. Pretty much any area that dropped, Lightspeed stock was related to it.
Yet, as seen during its most recent earnings report, the drop in share price isn’t so warranted. That’s especially true as the company made strategic moves that led to profitability. Profitability that’s likely to grow more in 2024.
Shares rise
During the last earnings report, Lightspeed stock was able to post positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). Total revenue increased 25% year over year to $230.3 million, with its net loss achieving positive adjusted EBITDA. Gross payments volume reached $5.9 billion as well, a huge 59% increase year over year. This quarter was a strong move towards the company’s 2024 fiscal goals and, in fact, led it to raise its 2024 outlook.
Lightspeed stock now expects to achieve between $232 and $237 million in revenue for the third quarter of 2024. Further, adjusted EBITDA should reach $2 million, again marking a profitable quarter. Furthermore, 2024 should hit between $890 and $905 million in revenue, with adjusted EBITDA breaking even if not performing even better.
Yet shares haven’t reacted to the news, which could mean that there is a short opportunity for investors. One that isn’t likely to last long as the market continues to climb.
“We are greatly undervalued”
In an interview with Chief Executive Officer (CEO) Jean-Paul Chauvet, the CEO stated he believes the company is now “greatly undervalued” in terms of share price. While other tech stocks have climbed, Lightspeed stock remains around $22 per share, despite showing just as strong growth.
In fact, the company wants to achieve even more profitability in the next year. This would come from its focus on expanding Lightspeed Payments. Right now, 25% of the company’s merchants use Lightspeed Payments. The company is striving towards reaching 50% Lightspeed Payments penetration in the next 18-24 months. This would create an incredibly large increase for the company as well.
After that, the company will turn its focus on credit. But that’s not to say it’s not working on bringing more retailers and restauranteurs to the company. According to Chauvet, there are about 65 million retailers and restauranteurs on the planet, with three to four million having more than 10 employees. That’s the market they’re going after, marking a large amount of room for growth.
“What gets us excited … is that the majority of the market is on legacy systems that are still not on the cloud and still not on credits,” Chauvet told Motley Fool. “The market needs platforms like ours now.”
So, with shares still at a fraction of where they were in September 2021, Lightspeed stock should certainly be on your radar — especially as shares have climbed 35% in just one month.
