Lightspeed POS’s stock is already too expensive, this fund manager says

This month’s IPO by Lightspeed POS (Lightspeed POS Stock Quote, Chart TSX:LSPD) drew a lot of interest, with many investors hoping to get in on the newest addition to Canada’s publicly-traded tech sector.

But for those of us looking for value investments, you might want to stay clear, says Stephen Takacsy of Lester Asset Management, who claims that like its e-commerce cousin Shopify, Lightspeed already has a tonne of priced-in future growth.

“We met management before the IPO and we made a decision not to participate —we’re more value-driven and we thought the valuation was quite rich,” says Takacsy, president and CEO of Lester Asset Management, to BNN Bloomberg Wednesday. “It’s obviously in a very hot sector and people are comparing it to Shopify, although what Lightspeed does is software for point-of-sales for smaller retailers.”

“It’s a good recurring revenue model and it’s a really good business, but we just felt that the multiple to sales was extremely rich,” he says.

Montreal-based Lightspeed lit up the Toronto Stock Exchange on March 8 with an initial public offering that raised $240 million, the most by a Canadian tech company since 2010’s IPO by Smart Technologies, later acquired by Taiwanese multinational Foxconn. LSPD has already had its ups and downs, debuting at $16 per share and almost hitting $24 by March 13. The stock has since settled into the $20-$21 range. (All figures in Canadian dollars unless noted otherwise.)

“We knew that the stock would go up because it’s a pretty hot topic,” says Takacsy, “but we don’t play that game of flipping out of IPOs and so on. If ever there’s a slowdown or a disappointment in earnings, these stocks come crashing down.”

“I think they have a good product. They’re getting a lot of customers but we don’t know what the churn is. There are still a lot of unanswered questions, as there are in the case of Shopify, so just beware on that aspect,” he says.

Lightspeed operates in over 100 countries worldwide and has offices in Canada, the US, Europe and Australia with approximately 700 employees in total. According to regulatory filings, Lightspeed generated gross profit of US$50 million over the past year on US$72 million in revenue.