Is Lightspeed Stock a Buy, Sell, or Hold?

Down 88% from all-time highs, is Lightspeed stock a good buy in May 2024 and can the TSX tech stock outpace peers?

| More on:
Dice engraved with the words buy and sell

Image source: Getty Images.

Valued at a market cap of US$2.24 billion, Lightspeed Commerce (TSX:LSPD) went public more than five years back. Between its initial public offering in March 2019 and September 2021, LSPD stock returned a remarkable 740%. However, the TSX tech stock currently trades 88% below all-time highs and trails the broader markets by a significant margin. Let’s see if LSPD stock is a buy, sell, or hold at current prices.

Lightspeed’s revenue growth is decelerating

Lightspeed’s robust platform helps merchants simplify, scale, and provide “exceptional customer experiences.” Its cloud commerce solution unifies online and physical operations, multichannel sales, new location expansions, global payments, financial solutions, and much more.

Lightspeed grew its sales from US$221 million in fiscal 2021 to US$909 million in fiscal 2024 (ended in March). In the last three years, the company grew its sales by more than 60% annually primarily on the back of acquisitions. However, in fiscal 2024, its top-line growth decelerated to just 24%.

Lightspeed Commerce reported revenue of US$230.2 million in the fourth quarter (Q4) of fiscal 2024, up 25% year over year. While transaction-based revenue rose 40% to US$139 million, subscription revenue rose 7% to US$81.3 million.

Its sales growth allowed Lightspeed to report an adjusted profit of US$8.5 million or US$0.06 per share in Q4, compared to a loss of US$400,000 in the year-ago period.

Similar to other growth stocks, Lightspeed aims to reduce its costs to navigate a challenging macro environment and boost the bottom line. It recently announced cost-reduction initiatives to improve its financial performance which should also help the company to allocate capital towards key product developments. Lightspeed will reduce its workforce by 10%, reducing its operating expenses in the next 12 months.

During its Q4 earnings call, Lightspeed chief executive officer Dax Dasilva stated, “After successfully integrating our many acquisitions into our two flagship products and expanding adoption of our payments offering, Lightspeed is now entering a new phase, one focused on profitable growth to capture the opportunity in front of us.”

Is LSPD stock undervalued?

Lightspeed forecasts revenue to grow by at least 20% year over year in fiscal 2025, which might allow it to report an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of US$40 million.

Lightspeed expects to expand EBITDA profitability in the next 12 months while growing its high GTV (gross transaction value) customer base and subscription sales. A widening base of subscription revenue should help Lightspeed enjoy steady cash flows across market cycles.

The fintech company aims to balance sales growth and profitability as it seeks to scale its business beyond US$1 billion in revenue.

Analysts tracking LSPD stock expect sales to rise from US$909 million in fiscal 2024 to US$1.1 billion in fiscal 2025 and US$1.34 billion in 2026. Comparatively, adjusted earnings per share is forecast to expand from US$0.16 in 2024 to US$0.29 in 2025 and US$0.47 in 2026.

Priced at 50 times forward earnings, LSPD stock might seem expensive. But its earnings are forecast to almost triple in the next two years, allowing it to command a premium valuation. Analysts covering LSPD stock remain bullish and expect it to gain over 22% in the next 12 months.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Lightspeed Commerce. The Motley Fool has a disclosure policy.

More on Tech Stocks

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

3 Millionaire-Maker Tech Stocks That Should Be on Your Radar

These three tech stocks have already proven themselves worthy, but have a lot more to prove in the near future.…

Read more »

A close up image of Canadian $20 Dollar bills
Tech Stocks

3 No-Brainer Stocks to Buy With $20 Right Now

These three stocks are easy buys for those who don't have all that much to spend, and want long-term growth…

Read more »

A shopper makes purchases from an online store.
Tech Stocks

1 Tech Stock I’d Buy Before Shopify

Shopify (TSX:SHOP) stock might be stagnating, which could mean this other tech stock is at a prime advantage.

Read more »

man touches brain to show a good idea
Tech Stocks

Nvidia Stock Becomes World’s Most Valuable Company: Buy Now or Beware?

Nvidia (NASDAQ:NVDA) stock is now the world's highest valued company, with a market cap of US$3.34 trillion. So, is the…

Read more »

Dice engraved with the words buy and sell
Tech Stocks

Is Lightspeed Stock a Buy, Sell, or Hold?

Lightspeed (TSX:LSPD) stock was supposed to surge after Dax Dasilva's return, yet it's still stagnating. So, what should investors do…

Read more »

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

1 of the Best Canadian AI Stocks (With Dividends) to Buy Now

OpenText is an AI stock that trades at a significant discount to consensus price target estimates in June 2024.

Read more »

online shopping
Tech Stocks

3 Reasons to Buy Shopify Stock Right Now

Improving earnings quality, sustained cash flow growth, and another reason support a buy-the-dip thesis on Shopify (TSX:SHOP) stock today

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Tech Stocks

2 Canadian Growth Stocks I’d Stash in a TFSA for the Long Run

Here's why Constellation Software (TSX:CSU) and Shopify (TSX:SHOP) are two top Canadian stocks long-term investors should consider.

Read more »