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.
Lightspeed’s solid revenue growth trends
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.
