3 Reasons to Buy Lightspeed Commerce Stock Like There’s No Tomorrow

Here are three top reasons why I find Lightspeed stock so attractive to buy on the dip now and hold for years.

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Shares of Lightspeed Commerce (TSX:LSPD) jumped by nearly 44% in 2023, thanks to a tech sector-wide rally, which started after early signs of easing inflationary pressures convinced investors that the Bank of Canada could soon start slashing interest rates. However, LSDP stock is having a rough time this year as it has already plunged by about 36% so far in 2024 to currently trade at $17.85 per share with a market cap of $2.7 million. By comparison, the TSX Composite Index has risen more than 4% year to date.

But the recent losses, in my opinion, make Lightspeed stock look even more attractive for long-term investors. Here are three reasons why I think LSPD stock is a great buy on the dip right now.

In the third quarter of its fiscal year 2024 (ended in December), Lightspeed posted a strong 27% YoY (year-over-year) increase in its total revenue to US$239.7 million, which not only exceeded the company’s guidance but also Street analysts’ expectations.

With this, its revenue in the last 12 months has gone up 24.6% YoY, despite the ongoing macroeconomic challenges that have taken a toll on the spending capability of businesses across the globe. For a growth company like Lightspeed, this remarkable achievement reflects its ability to adapt to changing market conditions and customer needs, helping it expand its revenue base.

Inching closer to sustainable profitability

In the last few quarters, Lightspeed has also made healthy progress on its path to sustainable profitability. In the December quarter, the Canadian company reported an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of US$3.6 million for the December quarter, reflecting a significant increase over US$0.24 million in the previous quarter. Interestingly, this was LSPD’s second consecutive quarter of positive adjusted EBITDA.

Despite it announcing a strong YoY revenue and EBITDA growth and surpassing its own financial forecasts for the third quarter, a massive selloff in Lightspeed stock took place on February 8 — the day when the Montréal-headquartered commerce platform provider released its latest quarterly financial results. That day, the stock lost nearly 24% of its value, making it look undervalued to buy on the dip.

Strong fundamental growth prospects

As Lightspeed continues to inch closer to sustainable profitability, its long-term fundamental growth prospects are also improving. The company has witnessed strong growth in recent quarters through its Unified Payments initiative. This initiative significantly helped it increase the gross payment volume by 69% YoY last quarter, showcasing successful customer adoption without expected churn.

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Additionally, the company’s disciplined cost management and strategic product launches, including international expansions of Lightspeed Capital and innovative payment solutions, are fueling its revenue growth and improving its profitability, highlighting its strong financial base and market adaptability. I expect these strategic moves to help the company accelerate its financial growth trends further in the years to come.

Foolish takeaway

Even as Lightspeed stock witnessed a spectacular recovery in the fourth quarter of 2023, it has seen nearly 78% value erosion in the last three years combined. Given all the positive factors I highlighted above, LSPD could be a great value stock pick right now for investors looking for a long-term play on the e-commerce and payments industry.

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.

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

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