Lightspeed will be in greater demand post-pandemic, this investor says

Canadian e-commerce name Lightspeed POS (Lightspeed POS Stock Quote, Chart, News TSX:LSPD) has done well to claw back some ground over the past couple of months but with the company’s business tightly twinned to shops and restaurants, is the stock vulnerable to the longer-term malaise expected to hit those sectors?

More likely the opposite, says portfolio manager Bruce Campbell, who argues small businesses and restaurants in the COVID-19 and beyond environment will be more inclined to make every penny count and so they’ll be drawn in greater numbers to tools like Lightspeed’s point-of-sale platform.

It’s one that we continue to own and we have a full weight position in the portfolio right now,” said Campbell of StoneCastle Investment Management, who spoke on BNN Bloomberg on Wednesday.

“We’ll continue to own it because we think that coming out of of the pandemic and the restart of the economy, [restaurants and retail] are two areas that are going to have to be most efficient. Lightspeed’s monthly fee that they charge the retailers isn’t a lot but if it makes them more efficient, if it allows them to be more profitable and bringing more business, that’s going to help them survive.”

“So we actually think that Lightspeed is probably going to prosper here in the future,” Campbell said.

Lightspeed’s share price shot up last week on the company’s fourth quarter earnings, which saw a year-over-year revenue increase of 70 per cent to $36.3 million for the quarter ended March 31. The company registered a loss of $18.6 million compared to a loss of $96.1 million a year earlier. (All figures in US dollars.)

And while those numbers came in a quarter only partially affected by COVID-19 social distancing measures which have forced the closure, either temporarily or permanently in some cases, of shops and restaurants, the strength of Lightspeed’s business was a good sign. The company registered 76,500 customers by the end of March, up from 49,000 a year earlier.

In his quarterly comments, found and CEO Dax Dasilva said there’s a historic shift going on in the way small and medium-sized businesses are run.

“Being omni-channel has never been more important,” said Dasilva. “Our merchants are progressive, omni-channel thought-leaders that continuously reinvent the retail and hospitality landscapes. We are proud to be their key technology partner and are committed to powering their growth.”

Campbell said with the recent rise in share price, investors looking to get in on the stock may want to wait for a pullback, which, considering the volatility of the stock, is more than likely to occur.

“It’s a highly volatile stock,” Campbell said. “It tends to swing back and forth and can do so sort of ten or 15 per cent in a day is not unheard of. So, it’s one that if you don’t have a position, maybe you start a partial position and wait for a pullback. If you do have a position then you can manage around that volatility as well.”