Shares of Canada-based fintech company Lightspeed Commerce (TSX: LSPD) have taken investors on a roller-coaster ride since its IPO (initial public offering) in 2019. Lightspeed priced its IPO at $16 per share, and the stock touched a record high of $160 in September 2021.
In late 2021, a short-seller report from Spruce Point Management accused Lightspeed of inflating several metrics, such as its total addressable market, customer count, and gross transaction volume (GTV), sending the stock spiralling downwards.
In the report, Spruce Point claimed it found evidence where Lightspeed overstated its customer count by 85% and GTV by 10%. It also emphasized Lightspeed was wrestling with declining organic growth even though the fintech entity claimed its average revenue per user was increasing.
Today, LSPD stock trades 89% below all-time highs, allowing you to buy the dip. Valued at a market cap of $2.65 billion, is Lightspeed stock a good buy right now? Let’s see.
The bull case for Lightspeed stock
Lightspeed offers a cloud-based commerce platform connecting suppliers, customers, and merchants. Its software platform provides customers with critical functionally to manage operations, accept payments, and grow their businesses.
Over the years, Lightspeed has primarily targeted small and medium businesses in verticals such as retail and restaurants as well as golf course operators. A majority of the company’s sales are recurring in nature, resulting in stable cash flows across market cycles.
Since the start of fiscal 2024 (ending in March), Lightspeed has been selling its PoS (point-of-sale) and payments solutions in a unified offering. This allows it to streamline support and billing, resulting in higher customer engagement and retention rates.
Lightspeed emphasized its platform is built to scale and can support customers as they open new locations. For instance, Lightspeed’s robust platform can offer sophisticated solutions as business requirements become more complex.
What’s next for LSPD stock?
In the fiscal third quarter (Q3) of 2024, Lightspeed reported revenue of US$239.7 million, an increase of 27% year over year. Lightspeed’s transaction-based revenue stood at US$147.8 million in fiscal Q3 of 2024, rising 38% from the year-ago period, primarily driven by increased customer adoption of its payments solutions. Comparatively, subscription sales rose 9% to US$80.9 million.
The Canadian tech company reported an adjusted net income of US$11.8 million or US$0.08 per share, compared to a net income of just US$400,000 in the year-ago period. Lightspeed stated its ARPU (average revenue per user) rose 28% to US$447, up from US$348 in the year-ago quarter.
Analysts tracking LSPD stock expect its earnings per share to improve to $0.21 in fiscal 2024, compared to a loss of $0.22 per share in 2023. Further, adjusted earnings are forecast to expand to $0.27 per share in fiscal 2024.
Lightspeed ended 2023 with US$749.4 million in cash, providing it with some flexibility to support its burn rates in the near term.
Investors would want Lightspeed to deliver consistent profits while growing the top line at a steady pace amid an uncertain and challenging macro environment. Analysts remain bullish on LSPD stock and expect shares to surge by roughly 50% in the next 12 months, given consensus price target estimates.
