After a shaky start to 2025, Lightspeed Commerce (TSX:LSPD) has shown signs of a promising turnaround, gaining 16% in July alone. The Canadian tech stock had faced considerable pressure earlier in the year, primarily due to broader macroeconomic uncertainties. Investor sentiment was further dampened when the company chose to remain publicly listed, passing on a potential opportunity to go private. This move irked investors. The result was a drop in its share price.
However, that decline also created a compelling entry point. As fears of a looming recession began to ease, the market started to re-evaluate Lightspeed’s long-term prospects, helping the stock rebound. And while the recent rally is encouraging, there are reasons to believe that the recovery still has legs.
Lightspeed’s underlying fundamental trends are gaining strength. The company is making meaningful progress in its key growth markets, while its focus on profitability continues to drive operational improvements. Notably, customer location counts are on the rise, and average revenue per user (ARPU) is trending upward. These are signs that the company’s platform is gaining traction with customers.
What makes Lightspeed particularly attractive at this stage is that its improving fundamentals aren’t yet fully reflected in its valuation. Despite the July rally, the stock still trades at a level that doesn’t seem to account for its growth potential, making it a compelling investment.
Why Lightspeed stock has room to run?
Lightspeed is well-positioned to capitalize on the shift in selling models toward digital and multi-channel commerce platforms. Further, its strategic focus on growing its North American retail footprint and expanding in European hospitality is starting to show results. These markets are proving to be powerful growth engines, helping the company capture more high-value customers and boost profitability.
In its latest quarter, Lightspeed’s total revenue rose 15%, primarily driven by gains in software ARPU and increasing adoption of its payments platform. Its key growth markets, North America and Europe, continued to transition to Lightspeed’s ecosystem, with more businesses layering in new software modules.
The company added 1,700 net new customer locations in its growth markets in Q1, a 5% year-over-year increase. Software revenue climbed 9%, while software ARPU jumped 10%, thanks to innovative products and strong demand for its flagship offerings. ARPU hit a record $655, up 16% year-over-year, with growth markets outpacing efficiency markets. As these high-revenue locations expand, overall ARPU should continue to rise.
Lightspeed is also unlocking new profit streams. Its capital business and global payments expansion are set to further improve margins. As more customers adopt Lightspeed Payments, overall gross profit dollars should increase.
With adjusted free cash flow approaching breakeven and momentum building across payments, capital, and software revenue, Lightspeed looks well-positioned for sustained growth.
Lightspeed stock looks attractive on valuation
Lightspeed stock looks attractive on the valuation front. It trades at a next 12-month (NTM) enterprise value-to-sales (EV/Sales) multiple of 1.4 times, which is low considering its growing scale, increase in customer locations in growth markets, and rising ARPU. This attractive valuation presents a compelling entry point near the current levels.
The bottom line
Lightspeed Commerce’s 16% surge in July marks a strong signal that investor confidence is returning. With rising ARPU, customer growth in key markets, and increasing adoption of software and payments, Lightspeed is poised to deliver solid growth. Moreover, its strategic push into high-potential geographies and focus on profitability are beginning to pay off, supporting long-term growth.
