Canadian tech newcomer Lightspeed POS (Lightspeed POS Stock Quote, Chart, News TSX:LSPD) was one of the best IPOs in 2019 but the stock has been drifting along for a number of months now.
Not a good sign, says Jeff Parent of CastleMoore Investment Counselling, who thinks that from a technical perspective investors can do better elsewhere.
Speaking to BNN Bloomberg last Friday about Lightspeed’s performance over the past ten months, Parent said, “It looks good but it’s not doing too much right now. We see a top forming along here and then a consolidation. It’s an upward slope in a consolidation so that’s positive [but] I’d probably avoid the stock right now for any new purchases.”
“If you hold it, hold onto it, but there are a lot of other stocks that have better formations and better setups,” said Parent, vice president and chief investment officer at CastleMoore.
Montreal-based Lightspeed, which offers point-of-sale software to small and medium-sized businesses specifically in the retail and restaurant industries, burst onto the scene in March of this past year with an initial public offering that raised $240 million. It was the largest IPO from a Canadian tech company in nine years. Shares were initially set at between $13 and $15 but were bumped up to $16 on high demand. LSPD closed its first day of trading at $18.90 per share, putting the company’s market cap at over $1.65 billion.
Investor interest stems from Lightspeed’s growth potential where at 57,000 customer locations as of its last quarter and with growth predicted for retail for years to come, the runway looks long and prosperous.
The stock continued to climb until hitting almost $50 per share in August where the pullback began, dropping the stock into the $30-$40 range where it has stayed over ensuing months.
Parent says a move above the $40 mark could make the stock a buy, however.
“If I were to buy this I’d want to see it trading above $40 as an entry point. I wait for those triggers, they’re very important, especially when you see a bottom formation on a risky stock,” Parent said.
“If the stock had a better trend upwards then I’d say, yes, buy it and then you have an upward-moving stop line which is probably a moving average. That stop line would be an exit point,” he said.
Lightspeed last reported earnings in early November where the company posted revenue of $28.0 million, a 51-per-cent increase over a year earlier and ahead of management’s guidance of $26.5 to $27 million. The company’s adjusted EBITDA loss of $5.1 million was also ahead of guidance in the range of negative $5.5 million and $6.0 million.
Lightspeed also made a couple of notable acquisitions over the quarter in Switzerland-based iKentoo and Kounta, a hospitality POS platform operating in Australia and New Zealand.
In the company’s quarterly comments, Lightspeed CEO Dax Dasilva said that the acquisitions extend the company’s geographic coverage where Lightspeed grew its customer base by 26 per cent over the past year.
‘[Merchants] choose us because we strengthen the performance of nearly every aspect of their operations, and they know we are committed to continuous innovation in delivering the best commerce platform in the world,” said Dasilva in the press release.