Lightspeed POS (Lightspeed POS Stock Quote, Chart, News TSX:LSPD) has so far rewarded investors who were smart enough to get in early on the recently-listed company, with the stock tripling in value since its debut in March.
But while there’s likely more upside to the name, that may take a few more years to materialize, says Alex Ruus of Arrow Capital Management, who thinks that LSPD is now overvalued.
Lightspeed’s coming out party was a smashing success earlier this year, with its initial public offering netting a cool C$240 million, the biggest total for a tech IPO in almost a decade.
The stock began to pick up steam midway through the year climbing as high as C$49 earlier this month — a huge increase and one that put LSPD, at least in terms of market gains, in the same league as that other Canadian tech juggernaut, Shopify.
The Shopify comparison goes further, as both companies operate in the e-commerce space and have small- and medium-sized businesses as a key focus.
But where Shopify’s platform aims to be a complete package for online retailers, Lightspeed has so far focused on point-of-sale software and analytics, notably for the restaurant space.
Part of what’s attractive about Lightspeed is its management team, says Ruus, who spoke to BNN Bloomberg on Monday.
“It’s an excellent up and coming technology company from Montreal. It’s in the same general area as Shopify but they do a lot of point-of-sale business. It’s a really well-run firm. The stock is up 200 per cent from the IPO. This is one of these stocks where it’s an excellent company and they’re going places,” says Ruus, portfolio manager at Arrow Capital.
Lightspeed POS: Stock is “quite pricey”
“But they’re really not making money yet and the valuation now is quite pricey. I think it’s overpriced, based on the potential for the next several years,” Ruus says.
Lightspeed posted its first quarter of the fiscal year on August 8, which featured a larger-than-expected loss of $9.1 million or 11 cents per share for the three months ended June 30.
On average, analysts had expected a loss of $7.34 million or nine cents per share. The quarter turned out to be a beat on revenue, however, generated sales of $24.1 million compared to the consensus estimate of $23.2 million. (All figures in US dollars unless where noted otherwise.)
“This past quarter demonstrated solid execution on a number of our stated growth strategies to ensure Lightspeed continues our journey of building a recognized market leader for SMB retailers and restauranteurs globally,” said CEO Dax Dasilva in a press release. “Accelerated top-line growth of 38 per cent, continued GTV growth of greater than 30 per cent, and accelerating Payments adoption rates on eligible new customers in the quarter are all effective gauges of a healthy, growing customer base that is finding increased success through partnering with Lightspeed.”
Ruus says that for those not already holding LSPD, there may be better options out there at the moment.
“I would not be a buyer here,” Ruus says. “But if you hold it and if they continue to execute the stock will probably go higher in a three-to-four-year timeframe. But at these levels I’m just not interested because there are better opportunities in the market.”