Down by 31.43%: Is Lightspeed Stock a Buy After Earnings?

While its decline in share price might suggest the company isn’t doing well, the earnings report makes Lightspeed stock seem like an attractive buy.

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Lightspeed Commerce (TSX:LSPD) has had an interesting year of trading on the stock market and as a company, and things keep getting interesting. The $3.01 billion market capitalization Canadian tech stock was fighting off the effects of a short-seller report from 2021 and a meltdown in the tech sector to improve its financial position and increase its global presence.

The underlying business has managed to pull that off. And yet, looking at its recent share prices might make you think the company is in deep trouble.

However, investors might have reasons to believe the complete opposite. Lightspeed stock recently released its earnings report, followed by a substantial drop in its share prices. We will take a closer look at the situation to help you determine why it might be a good buy right now.

The earnings and the drop

Lightspeed Commerce stock reported its third-quarter earnings for fiscal 2023 earlier this month, and the situation is quite good. Lightspeed beat its earnings estimates, reporting a 27% growth in its organic revenue from the same quarter last year.

The company’s expansion of its Unified Payments product is going well, with 29% of its clients using the platform. With all these improvements, you would expect the Canadian growth stock to see a positive trend in its share prices.

However, the earnings report also indicated that the company had a US$40.2 million net loss, and its subscription revenue, compared to the same period last year, grew by only 9%. While seeing a net loss might worry investors, even analysts who talk about the stock negatively might want to reframe how they view the stock.

The company increased its year-over-year revenue by 25%, reducing its net loss to half the amount it reported in the same period last year. It was also the first quarter for Lightspeed Commerce, where its earnings before interest, taxes, depreciation, and amortization (EBITDA) were in the green.

Granted, it was a profit of only $200,000. However, it was a much-needed improvement from the anticipated and dreaded $4 million loss in its EBITDA.

Foolish takeaway

Lightspeed Commerce saw an 8.06% jump in its share prices between February 13 and February 15, when Jean-Paul Chauvet stepped down from the chief executive officer (CEO) position. While a shakeup in the upper echelons of a company typically sparks fears and selloffs, Chauvet was replaced by the returning Dax Dasilva. Dasilva founded Lightspeed Commerce in 2005 and served as its CEO till 2022.

Dasilva has come back in for the next stage of Lightspeed’s growth. He said that while it is important for investors to see growth in its subscription revenue, the account managers at Lightspeed are focused on Unified Payments. Chauvet laid the framework to make Lightspeed profitable.

Now, Dasilva aims to improve the company’s profit margins to fuel its growth through opportunities it will fund through operational efficiency.

If Dasilva can make and execute a plan that fosters growth in revenue from Unified Payments and subscriptions, share prices will likely grow. It might be a good idea to shore up on positions in Lightspeed stock for investors betting on a bull run for the company after recent developments.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Lightspeed Commerce. The Motley Fool has a disclosure policy.

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