Is Lightspeed a Buy, Sell, or Hold?

Lightspeed (TSX:LSPD) stock remains around $20 per share, even after strong earnings. But is there enough future momentum?

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Investors wouldn’t be blamed for not exactly knowing what to do with Lightspeed Commerce (TSX:LSPD) shares right now. There has been so much going on, and yet shares continue to trade around $20 per share on the TSX today.

Yet there’s been big news coming out of the company. Lightspeed stock first announced recent earnings that provided strong financial results. Revenue was up 27% year over year, exceeding expectations. The company also achieved the second consecutive quarter of positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $3.6 million!

But when it came to subscriptions, investors wanted way more, which is why former chief executive officer Dax DaSilva came back into the role. Known for his focus on growth, he is aiming to get subscriptions back up once more.

So, should investors buy, sell, or hold Lightspeed stock after this?

Buy

There has recently been some strong financial growth for Lightspeed stock, which is one reason many investors may want to consider buying it. The company has been exceeding estimates, with the latest quarter just one example.

What’s more, there is a lot of potential for growth in the near term. First, there is the focus on Unified Payments. The company is targeting 30-35% in gross transaction volume (GTV) by the end of this year — all coming from Unified Payments.

Second, profitability is also up, with Lightspeed stock looking to achieve break-even or better in terms of adjusted EBITDA. Analysts then went on to increase their price targets from the good news — especially as DaSilva looks to seek more growth through higher subscriptions. Specifically with an eye on enterprise-level companies, those making over $500,000 in revenue annually.

Sell

Yet, these are all based on a lot of hope. And the transition to DaSilva shouldn’t be ignored. Right now, there is unproven success of the payments initiative on an international scale. Lightspeed Payments is showing success domestically, but the international pace remains uncertain. This could hinder the plans for the 30-35% growth in gross payment volume (GPV) as a percentage of GTV.

What’s more, it could be a bumpy road to getting more enterprise-level clients. Meanwhile, the focus on more enterprise clients has seemed to lead to a drop in small- and medium-business-level clients. Granted, one enterprise client could make up for even a dozen small businesses.

Then there is the caution Lightspeed stock has predicted in the near future from the uncertain economic environment as well as seasonal weakness. So, at least in the near term, it doesn’t exactly look certain that the stock will rise.

Hold

Altogether, this is a fair balance between why you should buy and why you should sell. Lightspeed stock has already put itself back to profit, and that looks like it will continue — especially as Unified Payments roll out.

There is also growth potential as DaSilva focuses on this key area, while still rolling out payments. And with profitability on the horizon, that’s another reason to at least hold the stock for now — especially with analysts predicting more growth in share price.

As you can see, I’m a Lightspeed stock investor. I’ll continue to hold it as the stock continues to show a positive outlook over time. Once the market returns to normal and the stock achieves those targets, that’s when I’ll want to see that the stock has more plans for growth. Until then, I’ll at least hold it for now.

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 Amy Legate-Wolfe has positions in Lightspeed Commerce. The Motley Fool recommends Lightspeed Commerce. The Motley Fool has a disclosure policy.

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