Lightspeed Commerce (TSX:LSPD), a Montreal-based software provider specializing in point-of-sale and e-commerce solutions, has garnered attention from investors looking for growth in the tech space. Following its most recent earnings release, there’s been a renewed interest in whether Lightspeed’s stock might be a buy right now. So, let’s get into it.
Into earnings
For the most recent quarter, Lightspeed stock reported revenue of $277.18 million, edging past analysts’ expectations of $273.90 million. Its adjusted earnings per share (EPS) came in at $0.03, slightly outperforming the expected $0.02. These results reflect progress in Lightspeed stock’s efforts to streamline operations and increase efficiency, thus offering a glimmer of hope for those waiting to see Lightspeed edge closer to profitability.
Over the past year, Lightspeed stock navigated a rollercoaster, trading within a 52-week range of $11.01 to $21.71. It remains below its highs but demonstrates some positive momentum. That volatility, underscored by a five-year beta of 2.71, signals a higher risk/reward profile compared to steadier investments. Notably, the company’s market cap now hovers around $3.5 billion, solidifying its place as a notable player in the Canadian tech landscape. However, its forward price-to-earnings ratio of 31.15 indicates investors are paying a premium for future growth rather than current profitability, which remains elusive.
What happened?
Lightspeed stock’s journey in recent years has been characterized by ambitious growth strategies. These included acquiring multiple companies to expand its global presence. While these moves boosted revenue, they also created challenges, particularly in integrating the acquisitions and improving margins. Lightspeed stock’s net income remains in the red, with a trailing 12-month net loss of $137.44 million and a negative profit margin of 13.56%. Still, there are some positive signals. Quarterly revenue growth year over year stands at an impressive 20.4%, reflecting the resilience of its business model and the company’s success in capturing a larger share of the market.
The return of founder Dax Dasilva as chief executive officer has been another key development. Dasilva’s renewed leadership signals a back-to-basics approach, focusing on Lightspeed stock’s core strengths and shifting attention towards profitability. Reports earlier this year indicated that Lightspeed was exploring strategic options, including a potential sale. This development, while speculative, adds another layer of intrigue to the company’s outlook. For now, Lightspeed stock appears committed to its strategy of serving high-gross-transaction-volume customers. One the company believes will drive more stable, long-term revenue growth.
Now what?
Lightspeed stock’s balance sheet also deserves a closer look, as it provides the company with flexibility during uncertain times. As of its most recent quarter, Lightspeed stock reported $659.02 million in cash and cash equivalents, far outweighing its modest $21.96 million in debt. This results in a comfortable debt-to-equity ratio of 0.94% and a current ratio of 6.08. This means the company has significant liquidity to weather challenges and continue investing in growth opportunities. It’s also worth noting that Lightspeed has managed to generate positive levered free cash flow in the trailing 12 months, albeit a modest $31,620, which is a step in the right direction.
Despite its financial resilience and operational improvements, Lightspeed stock remains a speculative play for many investors due to its lack of consistent profitability. Its operating cash flow in the trailing 12 months is negative at $72.28 million, reflecting the continued cost of running its operations. Compounding this, Lightspeed stock competes in a highly competitive landscape with formidable players — ones that already dominate large portions of the e-commerce and payment software markets. To stand out, Lightspeed stock must execute its strategy flawlessly, driving top-line growth while improving margins and maintaining customer loyalty.
Bottom line
Ultimately, whether Lightspeed stock is a buy right now depends on your investment style and risk tolerance. For growth-focused investors with a long-term horizon, the stock presents an intriguing opportunity, especially given its strong liquidity, market position, and improving fundamentals. However, those looking for stable, profitable companies may want to hold off until Lightspeed stock demonstrates more consistent earnings. It’s a company in transition, showing promise but not without its challenges, making it a stock worth keeping on your radar.
