Investors planning to buy a stock in bulk could consider investing in the shares of Lightspeed (TSX:LSPD) right now. Shares of this technology company are trading cheap and are likely to get a boost from higher sales in the December quarter.
Notably, Lightspeed provides a cloud-based commerce platform featuring point-of-sale (POS) solutions. It primarily targets small and medium-sized businesses in the retail and restaurant space with its flagship unified hospitality and retail commerce offering.
Transaction-based revenues represent a significant portion of Lightspeed’s overall revenue mix, generating the strongest revenues in the December-ending quarter. This is due to the increased demand during the holiday season. While Lightspeed is poised to generate strong sales during the holiday season, which will lift its share price, let’s look at other factors that support my bull case.
Lightspeed stock to gain from digital shift
Lightspeed enables multichannel commerce, which positions it well to thrive in the current era of digital transformation. The company is strategically poised to capitalize on the growing demand for its point-of-sale (POS) solutions. This trend is particularly evident as a rising number of retailers and restaurant operators opt to modernize their payment systems, creating a heightened need for Lightspeed’s POS solutions.
Furthermore, any positive economic upswing will boost consumer discretionary spending. This will lead small- and medium-sized businesses to expand their operation and look for technological upgradation. As these enterprises seek to invest in technology, there will be a subsequent surge in demand for Lightspeed’s innovative digital products.
Lightspeed is eyeing profitability
With the shift in selling models towards omnichannel platforms, Lightspeed stands to gain financially. The company is set to profit from this shift and its revamped go-to-market strategy aimed at achieving sustainable profitability. Through operational streamlining, Lightspeed focuses on its two flagship products designed for retailers and restaurateurs. The company has made significant strides with this approach. By the end of the second quarter (Q2), its new flagship products accounted for about one-third of the overall customer locations.
Moreover, gross transaction volume (GTV) from its flagships grew 35% year over year, while total revenue for flagships jumped 124% year over year in Q2. Lightspeed is gearing up to expand its flagship products into global markets, which will accelerate its growth and support profitability, given the higher average revenue per user (ARPU) commanded by flagships.
Furthermore, Lightspeed has shifted its focus to customers with high GTV. In the second quarter of fiscal 2024, the company recorded 8% growth in customers with over $500K GTV, and those with over $1 million in GTV saw a 9% increase. This strategic shift is proving beneficial, as this commerce-enabling company experienced a 26% increase in total ARPU in Q2. These high-value customers not only generate higher ARPU but also have the potential to adopt multiple modules, allowing Lightspeed to drive organic revenues and minimize churn.
Acquisitions and valuation
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. While Lightspeed is expected to gain from its ability to acquire and integrate companies, its stock is trading cheaply, providing a solid entry point near the current levels.
Lightspeed stock is trading at a forward enterprise value/sales multiple of 1.8, which is at a multi-year low and much lower than its historical average.
Lightspeed’s solid organic sales, focus on driving profitable growth, and low valuation support its bull case and make it a compelling stock to buy in bulk near the current levels.