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 now?

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It was thought when Dax Dasilva came back to Lightspeed Commerce (TSX:LSPD) earlier this year, investors would see a return to booming share prices. After all, he was behind the wheel when shares surged to all-time highs.

But it seems even with strong quarterly results, partnerships, cost reduction, and even an Uber partnership, shares of Lightspeed stock have remained the same. So, what will it take, if anything? Today, let’s look deeper at whether Lightspeed stock is a buy, sell, or hold on the TSX today.

Buy

Lightspeed stock has shown substantial revenue growth, with a 25% year-over-year increase in the fourth quarter (Q4) of 2024, reaching $230.22 million. This robust growth demonstrates the company’s ability to expand its market presence and generate increasing sales. This is a positive indicator for future performance.

Furthermore, its recent partnership with Uber Direct and Uber Eats Marketplace enhances its service offerings for hospitality merchants. This collaboration allows Lightspeed to tap into Uber’s extensive delivery network, improving the value proposition for its clients and potentially attracting more customers.

Lightspeed stock has implemented cost-cutting measures. These should accelerate its path to profitability. The improvements in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and net loss figures in the latest financial reports reflect the company’s efforts to enhance its financial stability and reduce operational costs. It also operates in a competitive market but has managed to differentiate itself through comprehensive commerce solutions and strategic expansions. The company’s strategic initiatives and forward-looking approach position it well for continued growth and increased shareholder value in the future.

Sell

Still, despite improvements, Lightspeed Commerce continues to report net losses. In Q4 2024, the company reported a net loss of $32.5 million. The negative return on assets (-1.89%) and return on equity (-6.68%) indicate ongoing difficulties in generating profits from its investments and operations. This persistent lack of profitability is a significant concern for investors looking for stable, profitable companies.

Lightspeed stock’s valuation metrics suggest it might be overvalued compared to its earnings. The forward price-to-earnings (P/E) ratio of 37.14 indicates that investors are paying a high price for future earnings. This can be risky if the company does not meet growth expectations. Additionally, the price-to-cash flow ratio of 36.33 and price-to-book (P/B) ratio of 0.86 further highlights the high valuation relative to its financial performance.

What’s more, the market for commerce solutions is highly competitive, with numerous established players like Shopify and Toast. Lightspeed stock faces significant competition. This can impact its market share and profitability. This competitive pressure may limit its ability to achieve sustained growth and profitability.

Hold

These seem like balanced reasons to consider just holding Lightspeed stock for now. Analyst sentiment on Lightspeed is mixed, with a consensus rating of “hold.” The average price target of $26.50 indicates a potential upside of around 44%, suggesting some optimism about the company’s future performance. However, the presence of both hold and moderate buy ratings reflects uncertainty, making it prudent for investors to maintain their current positions without aggressively buying more shares or selling off.

Lightspeed has a high beta of 2.67, indicating significant volatility relative to the broader market. This makes the stock more susceptible to market fluctuations. This can lead to substantial price swings. For investors who can tolerate some risk and believe in the company’s long-term strategy, holding the stock might be a balanced approach to benefit from potential future gains while managing risk exposure.

Bottom line

Given the positive revenue growth, strategic initiatives, and the potential for future profitability, Lightspeed stock shows promise. However, the current financial metrics and market conditions suggest a cautious approach. Therefore, holding the stock is a prudent decision for investors who currently own it, allowing them to benefit from potential future growth while avoiding the risks associated with buying additional shares at this point.

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 and Shopify. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Lightspeed Commerce, Toast, and Uber Technologies. The Motley Fool has a disclosure policy.

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