Lightspeed Commerce (TSX:LSPD) stock has been on quite the roller-coaster ride. Trading at under $20 per share today, LSPD stock is a far cry from its soaring highs of over $160 back in 2021, when a wave of short selling nearly erased investor confidence. The dramatic decline has left many wondering if the dip represents a bargain or a sign of deeper trouble. Recent earnings and management’s transformation plan suggest that the technology stock might be emerging as one of the top TSX recovery stocks, but there are important factors to weigh before diving in.
Lightspeed to remain a publicly traded stock
A comprehensive strategic review in 2024 set the stage for a Lightspeed turnaround. The company decided against selling the business and instead chose to remain publicly traded, betting on its ability to reinvent itself and reward stock investors better.
Lightspeed has since zeroed in on its strongest markets—retail in North America and hospitality in Europe. By focusing on these two engines of growth, the company is working to optimize its software and payment offerings while trimming operating costs. Management’s new approach is already showing positive results, as evidenced by recent impressive quarterly performance figures.
Impressive quarterly earnings
In its most recent quarter, Lightspeed posted a 17% year-over-year revenue increase, reaching US$280.1 million. Even more encouraging is the 19% growth in average monthly revenue per user, now at US$533. These gains have come on the back of a successful transformation strategy that has helped the company shift its focus from simply surviving to laying the groundwork for a sustainable recovery.
Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) turned positive at US$16.6 million during the past quarter, beating prior guidance and signalling that the company’s efforts to enhance profitability are bearing fruit.
Lightspeed to execute a historic stock repurchase
Lightspeed Commerce’s upcoming share-repurchase program is another promising signal for investors. With a commitment to return up to US$400 million to shareholders, Lightspeed may reduce its share count by nearly 20% and retain about US$250 million cash on its balance sheet.
This reduction in outstanding shares could translate into higher per-share valuation metrics, including revenue per share and adjusted EBITDA per share, when the outstanding shares decrease. That said, losses per share may climb if operations don’t turn profitable soon enough.
For those watching LSPD stock, stock repurchases mean two things. Either management is confident in the company’s long-term prospects and is willing to repurchase undervalued LSPD stock, or management sees no profitable investment opportunities or projects to invest shareholders’ capital in and would rather return the capital to the market. The second potential reason for stock repurchases is quite concerning.
Won’t giving back capital bite?
Despite some encouraging improvements, Lightspeed is not yet sustainably profitable. While net losses have narrowed significantly and operational performance has improved, the company remains cash flow negative. There is a genuine risk that additional capital may be required if the current restructuring efforts don’t lead to a durable cash flow-positive turnaround. The stock’s historical volatility is a reminder that while the discount to its all-time highs is enticing, the market’s caution is based on real challenges that Lightspeed stock still faces.
Further headwinds come from external factors such as a strengthening U.S. dollar, which has put pressure on Lightspeed’s non-U.S. dollar revenues. The company reports in United States dollars.
While recent restructuring efforts reduced go-to-market positions, the company is investing in hiring in key growth areas. While management is optimistic new investments may pay off in fiscal 2026, the transition period brings additional uncertainty.
Investors should be mindful that delays in achieving sustainable profitability might not provide the rapid rebound some are hoping for.
Foolish bottom line
Lightspeed stock’s outlook remains cautiously optimistic. The company is showing promising signs through steady revenue growth, a renewed focus on its core markets, and strategic initiatives aimed at boosting profitability. A successful share repurchase could enhance per-share metrics and potentially drive the stock higher. However, the turnaround is still unfolding, and challenges persist—especially around maintaining profitability and possibly needing additional capital if restructuring efforts falter. Investors with a long-term, higher-risk appetite might find current valuations attractive, but it’s essential to watch upcoming earnings and the progress of the transformation plan closely.
