High-growth fintech stocks trading at a steep multiple in 2021 have trailed the broader markets by a wide margin in the last two years.
For instance, shares of TSX tech stock, Lightspeed Commerce (TSX:LSPD) went public in March 2019 and surged a whopping 800% to trade at all-time highs in September 2021. Currently, LSPD stock is down 84% from all-time highs, valuing the company at $3.8 billion by market cap.
Let’s see if the beaten-down TSX stock is a good buy right now.
The bull case for Lightspeed Commerce stock
Lightspeed Commerce offers a cloud-based commerce platform to small and medium enterprises. With a presence in more than 100 countries, Lightspeed has reported sales of US$812 million, while gross transaction volumes, or GTV, stood at US$89.6 billion in the last 12 months. The GTV is the total amount of payments processed by Lightspeed Commerce.
Lightspeed increased GTV by 61% from US$33.7 billion in fiscal 2021 (ended in March) to US$87.1 billion in fiscal 2023. In this period, its sales grew from US$221.7 million to US$730.5 million, indicating annual growth rates of 82%. A majority of Lightspeed’s growth in the last two years can be attributed to accretive acquisitions.
In the fiscal second quarter (Q2) of 2024, Lightspeed increased revenue by 25% year over year to US$230.3 million. The number of customer locations that generated more than US$500,000 in GTV rose by 8% in the September quarter.
Its transaction-based revenue stood at US$137.7 million, rising 36% compared to the year-ago period. Lightspeed attributed higher transaction sales to increased customer adoption of its payment solutions.
Since the start of fiscal 2024, Lightspeed has been selling its POS (point-of-sale) and payment solutions as a unified offering, which should result in higher customer spending and retention rates over time.
Lightspeed Commerce focuses on profitability
Similar to several other high-growth tech stocks, Lightspeed is focusing on improving the bottom line amid challenging macro conditions. It reported an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $242,000 in fiscal Q2, compared to an EBITDA loss of $8.52 million in the year-ago period.
Analysts tracking the tech stock expect its bottom line to improve from a loss per share of $0.22 in fiscal 2023 to earnings of $0.16 per share in 2024 and $0.48 in 2025. Comparatively, its sales are forecast to rise from $966 million in 2023 to $1.53 billion in 2025.
So, priced at 54 times forward earnings and 2.5 times forward earnings, LSPD stock is not very expensive if it can continue to grow earnings at a robust pace.
The Foolish takeaway
Lightspeed’s payment solutions are transparent and easy to understand. It has priced these solutions at competitive market rates based on a percentage of GTV processed on the platform.
The company continues to experience the adoption of its payment processing solutions, which is the key driver of top-line growth for the company.
Analysts tracking LSPD stock remain cautious. Out of the 14 analysts covering LSPD, six recommend “buy,” and eight recommend “hold.” The 12-month average target price for LSPD stock is $18.5, which is 3% below the current trading price.
