Lightspeed (Lightspeed Stock Quote, Chart, News, Analysts, Financials TSX:LSPD) has come a long way in its two years as a public company —perhaps a little too far, says David Burrows of Barometer Capital Management, who argues it might be better to wait on this one for a while.
Canadian e-commerce company Lightspeed saw both sides of the tech story over the past year, as the stock was buoyed upwards by the general market movement into tech last spring, especially towards companies connected to online retail like Amazon (NASDAQ:AMZN) and Shopify (TSX:SHOP). But the recent pullback in the sector has also been tough on LSPD, which had lost about 20 per cent over the last couple of weeks.
Burrows says those secular winds might be blowing against Lightspeed over the short term, at least.
“Lightspeed is a company that we have owned over the course of the last year and we actually got stopped out of it recently on this recent pullback,” said Burrows, president and chief investment strategist at Barometer, who spoke on BNN Bloomberg on Thursday.
“That’s not to say we wouldn’t repurchase it —it actually just pulled right back into the 150-day moving average above $60. It looks like it’s making a turn,” Burrows said. “So, it is kind of a recovery story, it’s a consumer story and it’s also, of course, a technology play.”
“I’d like to see it do a little bit more work. It did get caught up in the downdraft of stocks that people focused on during the early part of the recovery, and I think maybe it just needs a little bit more work before I would go there, Burrows said. “We’re keeping an underweight position in technology. We’re about half market weight, not because they aren’t good companies but because again they got very broadly owned and it’s possible that the risk/reward could be better in some other groups in the near term.”
Lightspeed bounced on Friday, gaining almost seven per cent on news of another major acquisition, this time it was New Zealand retail management software business Vend in a $350-million deal involving cash and stock.
Lightspeed said the Vend acquisition gives it a foothold in Asia-Pacific and doubles its customer base.
“The combination of Lightspeed with the talent and technology of Vend, widely acknowledged as providing one of the foremost retail products on the market, will help to further growth by ultimately providing the Vend customer base access to the company’s broader commerce solutions, such as Lightspeed Payments, Lightspeed eCommerce, Lightspeed Loyalty, as well as future access to the Lightspeed Supplier Network,” Lightspeed said in a press release on Thursday.
That acquisition comes a few months after Montreal-based Lightspeed grabbed a couple of American e-commerce companies last last year: restaurant management software business Upserve in a $430-million deal and cloud commerce company ShopKeep for $440 million. (All figures in US dollars except where noted otherwise.)
Those moves helped propel LSPD from the low C$40 range by the end of October to C$90 territory by mid-January. All told, the stock is up a whopping 375 per cent since its IPO in March 2019.
Last month, Lightspeed closed on a huge $676.2-million public offering of 9.66 million shares at $70.00 per share, with the company saying the proceeds will go towards strengthening the company’s financial position and pursuing its growth strategies. As of the end of its last reported quarter, Lightspeed’s fiscal third 2021 for the period ended December 31, 2020, the company had $232.6 million in cash and equivalents and $29.8 million in long-term debt.
On that third quarter, Lightspeed saw revenue grow by 79 per cent year-over-year to $57.6 million including the ShopKeep and Upserve contributions. Lightspeed said its customer base grew to almost 115,000 locations, up 74 per cent year-over-year when including ShopKeep and Upserve. Excluding the two businesses, LSPD hit 84,000 customers compared to 66,000 a year earlier.
“Despite ongoing challenges from the global COVID-19 pandemic, Lightspeed continued to see market success as small and medium-sized businesses adopted the Company’s cloud-based platform to help enable their omni-channel strategies,” the company said in its Q3 report on February 4, 2021.
“Software revenue increased partially due to a growing portion of Lightspeed’s customer base adopting more than one software module. Additionally, payments adoption, both in terms of the number of customer locations and the proportion of GTV processed, continued to grow, with revenue generated through Lightspeed Payments reaching another all-time high,” Lightspeed said.
Earlier this year, National Bank Financial named Lightspeed one of its top five best bets in technology for the 2021 year, with analyst Richard Tse saying the company’s Payments business should scale up this year while Lightspeed’s operating prowess, on display during the challenging pandemic environment in 2020, is what sets the company apart. Tse gave LSPD an “Outperform” rating in his January 12, 2021, report, and a price target of $80.00, which at the time of publication represented a projected 12-month return of 16 per cent.