Investors watching Lightspeed Commerce (TSX:LSPD) stock lately might be rubbing their eyes in confusion. The Canadian technology company recently reported a quarter with solid revenue growth and a visible path to profitability, yet the stock is down more than 22% year-to-date. Why is the market giving this fintech player the cold shoulder when its operational story is heating up? The answer lies in a mix of past stumbles and a failure to recognize a compelling turnaround narrative, making Lightspeed stock one of the most intriguing undervalued stories to watch this September.
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Lightspeed’s shadow of the past, and a clearing cloud
For many investors, the memory of a sharp short-seller attack in 2021 still stings. The allegations of material overstatement of the business’s size, quality and growth prospects, which the company has consistently denied, created a lingering stigma that has been tough to shake off. This chapter is now nearing its conclusion.
Management has recently proposed an $11 million settlement to resolve the associated class-action lawsuit, all without admitting any wrongdoing. While any settlement is a cost, this move effectively draws a line under a major overhang. With a court approval hearing set for November and a deadline for shareholders to opt out by October 15, the company is poised to put this significant distraction behind it. This clears the deck for management to focus entirely on steering the business forward — a crucial step for investor confidence.
Operational firepower meets market skepticism
Peel back Lightspeed Commerce’s recent stock price performance, and you find a business firing on most cylinders in 2025. Lightspeed’s first-quarter revenue for fiscal 2026 (covering the April-June 2025 period) hit US$304.9 million, a 15% year-over-year jump. More importantly, the company generated positive cash flow from operations of $12.4 million, a stunning reversal from a $14.2 million outflow a year ago.
Lightspeed’s strategic pivot towards larger retailers in North America and hospitality clients in Europe is working. The proof is in the latest numbers: the average revenue per user (ARPU) surged 16% to US$655. The company added 1,700 new customer locations and now powers over 145,000 businesses globally.
The launch of new artificial intelligence-powered features midyear 2025 could propel the company’s refocused and amplified go-to-market efforts during the second half of 2025 and into the next year.
Insider activity
Despite Lightspeed Commerce’s promising operating progress, insiders have been net sellers since June, transacting more than a billion worth of their employer’s stock. However, most sales are linked to compensation plans rather than a vote of no confidence.
The market’s skepticism is creating a glaring disconnect between performance and valuation.
An undervalued opportunity for patient investors?
Here’s where Lightspeed stock’s story gets exciting for potential investors. Lightspeed is currently one of the cheapest and potentially undervalued tech stocks on the TSX. Its shares trade at a price-to-sales multiple of just 1.7, a massive discount to the industry average of 6.6. This valuation seems to be pricing in the company’s shaky past rather than its future potential to generate sustainable cash flow.
The company could become free cash flow positive in 2026. If it hits its double-digit growth targets for 2026, including growing revenue by 10-12% and boosting its annual adjusted EBITDA (a measure of core profitability that stands for earnings before interest, taxes, depreciation, and amortization) to US$72 million, the current stock price could look like a steal in hindsight.
Lightspeed Commerce stock represents a classic opportunity for long-term-oriented investors: a fundamentally improving business temporarily shackled by old negative news. Once the stigma fades and the cash flow story takes centre stage, this undervalued stock could be poised for a significant re-rating.
