Lightspeed POS has “considerable upside”, National Bank Financial says

National Bank Financial launched coverage of newly listed Lightspeed POS (Lightspeed Stock Quote, Chart TSX:LSPD) on Tuesday with an “Outperform” rating and $25.00 target price, saying that the point-of-sale market is primed for disruption.

“Technology is democratizing access to value-creating systems and processes formerly unavailable to SMBs (small and medium-sized businesses) because of cost or lack of access,” says analyst Richard Tse in his coverage initiation. “Lightspeed’s offering plays into a POS market that’s ripe for disruption. With close to 50 per cent of POS software over five years old and nearly 20 per cent over 12 years old, we believe those numbers are even higher with SMBs.”

Tse estimates that Lightspeed has so far captured only 0.25 per cent of its addressable market of small- and medium-sized businesses globally. He argues that while there are many competitors in the POS market, Lightspeed differentiates itself with its broad and scalable end-to-end platform, combined with a higher value-for-service. Effectively, Tse sees Lightspeed close to doubling its average revenue per user over the next two to three years, with management continuing to make selective tuck-in acquisitions.

“With the stock up 29 per cent since its IPO, the obvious question is – how much is left? In our opinion, we see considerable upside – particularly for those investors with a longer-term view,” says Tse.

The analyst thinks Lightspeed will generate fiscal 2019 revenue and Adjusted EBITDA of $76.7 million and negative $13.0 million, fiscal 2020 revenue and Adjusted EBITDA of $104.4 million and negative $11.6 million and fiscal 2021 revenue and Adjusted EBITDA of $154.0 million and negative $4.5 million. His $25.00 target represents a projected return of 21 per cent at the time of publication.