Is Lightspeed Commerce a Buy?

Lightspeed (TSX:LSPD) stock certainly doesn’t seem to be catching up in share price, despite strong movement in earnings.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published January 5, 2024 9:30 am EST

Lightspeed Commerce (TSX: LSPD) has had quite the last few years. E-commerce companies, in general, saw a major increase in share price during the pandemic, but unfortunately, Lightspeed stock was one of the first to drop.

A short-seller report caused the company to collapse in share price, falling 30% in a day. This was back in September 2021, even before the drop in tech stocks came. It led to a huge shakeup in management, which pushed founder Dax DaSilva into an executive role, bringing in new chief executive officer J.P. Chauvet.

A worker uses a double monitor computer screen in an office. — Source: Getty Images

Fast forward to today

Tech stocks have since seen a bit of a rebound, yet Lightspeed stock remains a fraction of where it was in share price. The e-commerce and point-of-sale (POS) company went through several acquisitions and expansion projects that led investors to be unclear of its goals.

Yet that changed recently, with Lightspeed stock delivering a more streamlined company. The goal has always been for Lightspeed stock to manage larger enterprise companies — those that need a lot of help to manage their business, with a focus on restaurants and retailers. This has also included Michelin Star restaurants in the recent past.

And with its acquisitions now underway, Lightspeed stock is proving now more than ever that it can deliver. The focus is now shifting to unifying its merchants under its Lightspeed Payments, with the goal of achieving 50% of its merchants using Lightspeed Payment within the next two years.

Earnings show growth

The surprising thing for investors is that Lightspeed stock has been doing just as well as its competition, and yet shares haven’t responded the same way. During its second-quarter results, Lightspeed stock saw 25% year-over-year growth in total revenue to $230.3 million. Further, its net loss improved 47%, reaching positive adjusted earnings before interest taxes, depreciation, and amortization (EBITDA)!

Its software adjusted revenue per user (APRU) was also incredibly impressive at $425 — a 26% increase year over year. The focus now remains on profitability throughout 2024, with the company quite convinced that unified payments will help achieve this.

That focus has analysts believing the stock will outperform in the future. There is a focus on its two largest verticals, retail and hospitality, with two tech platforms. Its unified payments vertical is also accelerating in use, reaching 25% during the latest quarter. All this helps bring in larger clients who need help getting away from loyalty software programs.

Set to outperform

Analysts now believe Lightspeed stock will certainly outperform in the near future. Really, all it has to do is continue its focus on unified payments, bringing in more clients along the way. As more enterprise clients see success, more investors and institutions likely will as well. Eventually, this will lead to a higher share price.

That’s especially true as we enter a growth market, with a bull market coming in the next year. So, is Lightspeed stock a buy? I would say definitely. There is a lot of positive movement coming the company’s way, and shares are still quite undervalued. And even now, shares are up 25% in the last year. So, Lightspeed stock is certainly worth considering on the TSX today.