Should Investors Buy Lightspeed Stock Ahead of Earnings?

Lightspeed (TSX:LSPD) stock has served a period of drama for investors in the last few months, so what can investors expect next?

| More on:
A worker uses a double monitor computer screen in an office.

Source: Getty Images

Earnings seasons is once again ramping up. And one tech stock that is likely in the interest of many investors out there is Lightspeed Commerce (TSX:LSPD). Despite pretty drastic changes, from the return of the founder to a chief executive officer (CEO) role to massive layoffs, the company remains around $18 per share. Yet, with annual earnings around the corner, should investors consider Lightspeed stock once again?

What happened?

First off, let’s look at why Lightspeed stock has dropped and remained down in the last year or so. The Canadian tech stock provides cloud-based commerce platforms for large and enterprise-level businesses. With a focus on retail and restaurants, the company has since expanded its operations to empower companies to compete effectively.

And yet, after a short-seller report stated the the company’s gross merchandise volume (GMV) was all “smoke and mirrors,” stating also that acquisitions weren’t doing as well as hoped, shares dropped. And they haven’t risen back since.

In the last year alone, there have been more concerns that the focus on profitability, which Lightspeed stock has yet to achieve, has reduced their subscription growth. So, what can investors watch for in earnings?

Momentum

During the last few quarters, the company was under the direction of former CEO Jean-Paul Chauvet. So, let’s look at the last three quarters to see what momentum investors will want to see.

During the first quarter of 2023, Lightspeed stock reported revenue of US$209.1 million, with subscription revenue at US$78.7 million. It also reported a net loss of US$48.7 million. By the second quarter, revenue shrunk down to US133.2 million, with subscription revenue down as well to US$59.4 million. The net loss also increased to US$59.1 million.

For the third quarter, the company wanted to improve these areas. And it achieved that! Revenue almost doubled to US$239.7 million, ahead of its outlook. Subscription revenue also climbed to US$80.9 million. The net loss also shrunk back, now at US$40.2 million. The stock achieved positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the first time at US$3.6 million.

More subscriptions needed

While profitability has improved, Lightspeed stock is now under scrutiny for focusing so much on enterprise clients that small and medium businesses are dropping out.

While this happens, it means there has been a drop in subscription increases. The return of CEO Dax DaSilva, the founder of Lightspeed stock, is hoped to refuel the subscription increases once more. In an interview with Motley Fool, the founder said he’s coming back to shepherd Lightspeed stock into a new phase of growth. After a necessary period of focus on profitability.

For now, then, investors should consider looking at whether subscription levels indeed increased during the fourth quarter. Annual reports will be interesting as well to see where the company has shown improvements and is in need of others. But as DaSilva has said, don’t count on any more large mergers and acquisitions. Instead, more operational efficiency, which seemed to happen as the company recently laid off some employees. So, after two positive quarters and more growth needed, hopefully, the next earnings will provide more clarity for the years to come.

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.

More on Tech Stocks

Overhead shot of young adults using technology at a table
Tech Stocks

Forget NVIDIA: 1 Tech Stock to Buy Instead

Here’s why Shopify (TSX:SHOP) stock could be a smart long-term buy for investors willing to look beyond NVIDIA’s impressive growth.

Read more »

Lights glow in a cityscape at night.
Tech Stocks

2 Artificial Intelligence Stocks to Buy and Hold for the Next Decade

Qualcomm (NASDAQ:QCOM) and another well-placed AI stock could drive substantial capital gains over the next decade. Here's how.

Read more »

Arrowings ascending on a chalkboard
Tech Stocks

This Small-Cap Stock Is up 20% This Year, and Here’s Why it Can Go Even Higher

Here's why investing in small-cap growth stocks such as Sylogist can help you beat broader market returns over time.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Tech Stocks

Up 51% This Year: This Canadian AI Stock is Still Down 65% From Its Highs – Time to Buy?

Copperleaf Technologies (TSX:CLPF) stock has shown positive momentum as the AI stock attempts a recovery. Can shares rise 180% to…

Read more »

Person uses a tablet in a blurred warehouse as background
Tech Stocks

This Is the Best AI Stock to Buy Right Now

The problem with buying an AI stock with all the hype in the market is that it becomes difficult to…

Read more »

A microchip in a circuit board powers artificial intelligence.
Tech Stocks

After Nvidia: 4 Artificial Intelligence (AI) Stocks That Look Ready to Split

Nvidia just announced a stock split. Which semiconductor stocks might be next?

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

Lightspeed Stock Soars 19%: What Investors Need to Know

Lightspeed (TSX:LSPD) stock started climbing once more with higher performance and a promising guidance for the next year.

Read more »

stock research, analyze data
Tech Stocks

Where to Invest $7,000 in May 2024

Do you still have some contribution room available in your TFSA this year? These TSX two stocks should be on…

Read more »