Lightspeed Stock Has a Plan, Cash, and Momentum: So, Why the Doubt?

Lightspeed just delivered the kind of quarter that should steady nerves, but the market still wants proof it can keep executing.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published February 5, 8:30 pm EST

| More on: LSPD

Key Points

Lightspeed is narrowing its focus to the markets where it wins most, and location adds are improving.
The stock dipped because subscription growth is still soft and a bigger net loss included non-cash amortization noise.
If location growth, module attach, and cash flow keep improving, the “show me” story can turn into compounding.

Lightspeed Commerce (TSX:LSPD) earnings are out, with a quarter that should calm investor nerves. Growth improved, management raised its outlook, and the company sounded more focused than it has in years. Yet the market still treated the stock like it had something to prove, with shares dropping by up to 7%. CEO Dax Dasilva didn’t fight that reality. “It’s a show me story,” he told Motley Fool Canada, “and we’re delivering consistently.”

worry concern — Image source: Getty Images

What happened?

Let’s start with what Lightspeed stock does. It sells point-of-sale (POS) software to retailers and restaurants, then earns more when those customers run payments through its platform. Payments can scale quickly with customer activity, while subscription growth reflects how fast the customer base expands and how much it pays for software.

Yet while in the past it took a “land and launch” approach, Dasilva said Lightspeed stock stopped trying to sell every product everywhere. It narrowed the core growth engine to North American retail and European hospitality, where the products fit best and win rates run higher. That focus showed up in customer growth. Lightspeed stock added about 2,600 net new locations in the quarter and ended with around 148,000 customer locations.

“Locations is the key, right? Because once you have a location that also comes with its related payments,” Dasilva said. “And then every new location… is future potential that you can sell modules.”

So, why the drop?

Now to the two pressure points investors should press on: soft software growth and the wider reported loss. On software, Dasilva’s answer is execution. He argued Lightspeed stock has built the outbound sales machine and now has to ramp productivity and attach more software modules over time. “We’ve fully hired our 150 reps for outbound,” he said, and expects training and new product rollouts to lift performance. Investors should watch for improving subscription growth and stronger revenue per location.

The net loss headline also needs context. Dasilva says the larger loss was not a sign that day-to-day operations weakened. Instead, Lightspeed stock accelerated depreciation and amortization on older technology assets from the pandemic acquisition period.

It chose to recognize more of that non-cash expense this fiscal year as newer builds, including artificial intelligence (AI)-driven features, which reduce the value of some legacy software assets. He expects that accelerated charge to show up again next quarter, then largely disappear in the new fiscal year. Next year should show cleaner results without that extra amortization drag.

What investors get today

With volatility in the markets, it’s clear why investors aren’t exactly jumping towards tech stocks like Lightspeed stock. Yet there are opportunities for today’s investor. Lightspeed stock has a $400 million buyback authorization and has executed about $200 million so far. “Subject to market conditions and board approval… we could potentially do more,” Dasilva added.

The risks remain real, including competition, churn, and mix. If rivals pressure pricing or payment economics, margins can stall. If subscription growth stays soft, the market may keep discounting the story. If location growth slows, the “show me” phase lasts longer. Yet with AI accelerating the use of multiple modules by current and future clients, Dasilva argued, giving customers access to their own data will allow them to be more competitive. And those improvements turn into payments, with payments funnelling to Lightspeed stock.

“That’s the kind of AI jet-powered tool that we can build with proprietary data. So, for us, we are excited and leaning in,” Dasilva said. “We’re providing a solution and have the data to actually power those tools.”

Bottom line

For long-term Canadian investors who own the stock, the next few years come down to repeatable execution. That means steady location adds, stable churn, improving cash flow, and accounting noise fading next year. If those pieces land, the story can shift from turnaround to compounding, and Lightspeed stock can reward patient investors handsomely.