Buy Lightspeed as a post-pandemic tech play, this investor says

It’s been choppy waters for tech stocks so far in 2021 but investors looking for a potential winner with the reopening of economies should be thinking about Montreal e-commerce company Lightspeed POS (Lightspeed POS Stock Quote, Chart, News, Analysts, Financials TSX:LSPD). That’s because the point-of-sale cloud platform business will be humming when retail and restaurants turn the lights back on, says Norman Levine of Portfolio Management Corp.

“Lightspeed is an interesting technology company and it had a great run,” says Levine, managing director at Portfolio Management, who spoke on BNN Bloomberg on Friday.

“It has come off some, but if you compare it to Shopify it’s actually almost an opposite in the fact that Shopify has done amazingly well during the lockdowns, as people have been been buying things online and they’re a big beneficiary of facilitating that,” Levine said. “Lightspeed will be more of a beneficiary when stores open.”

2020 wasn’t supposed to be Lightspeed’s year. The company supplies point-of-sale systems to small and medium-sized businesses, which, as everyone knows, got trashed last year as lockdowns closed shops not just in Canada but worldwide. And since Lightspeed’s forte is in improving customer engagement, payments and analytics, one would think that having fewer feet arriving to the shops would be a killer for LSPD.

Yet, the company performed surprisingly well, both in terms of its business and in terms of share price. On the latter, LSPD, a $10-billion market cap company which made its public debut in March, 2019, finished 2020 with an amazing return of 149 per cent.

On the business side, Lightspeed has continued to increase revenues through the pandemic, showing a topline up almost 80 per cent year-over-year in its last quarter, the company’s fiscal third, delivered in February.

Lightspeed, which reports its fourth quarter and fiscal 2021 year end results on May 20, hit $57.6 million in revenue for its fiscal Q3, up 79 per cent, with a net loss of $42.7 million compared to a loss of $15.8 million a year earlier.

The jump in revenue was a testament to both LSPD’s product and an overall push by SMBs to up their tech game in the tougher economic period. The company also broadened its business in the United States with two major acquisitions over the fiscal third in companies Upserve and ShopKeep, while LSPD’s customers continued to expand their usage of Lightspeed’s offerings — Gross Transaction Volume for the Q3, the total dollar value of transactions over the company’s platform, grew by 48 per cent to $9.1 billion.

“In addition to maintaining our strong execution we continue to deliver ground breaking innovations with the launch of the Supplier Network, demonstrating how Lightspeed remains deeply committed to democratizing access to the strategic capabilities our customers need to grow their businesses,” said Dax Dasilva, Founder and CEO of Lightspeed, in a February 4 press release.

Looking at Lightspeed’s performance in calendar 2020, National Bank analyst Richard Tse said the company responded better than expected — and importantly, better than many of its competitors — to the changing dynamics brought about by the pandemic.

Reviewing Lightspeed in a report to clients on January 12, Tse wrote,

“It’s our view that if the Company can operate under the conditions of the past year, we think a normalized environment would amplify that ability to execute that much more – the main reason why we still think there is plenty of upside in 2021. At the same time, we believe the Company has also opportunistically taken advantage of the market challenges to continue its land grab through acquisitions,” he said.

Lightspeed has kept up its M&A pace in the new year, acquiring in April Vend Limited, a New Zealand-based retail management software company for about $204.7 million in cash and about 2.7 million LSPD shares. Growing its Asia-Pacific presence, the Vend purchase brings Lightspeed to over 135,000 customer locations worldwide.

“We are thrilled to partner with Vend, a team that matches Lightspeed’s passion for retail. That combined drive will position our global retail base of high-performing businesses for success as they emerge from a truly transformational period in the history of modern commerce,” said DaSilva in a press release.

Levine says Lightspeed could be a bright light for tech investors in what could be a still stagnant environment in 2021.

“[Lightspeed] does a lot of IT for stores, they do some online and they help with that but the smaller stores are more going to benefit when they open and that will benefit Lightspeed,” Levine said.

“So, even though I believe that technology stocks have had their best time for a while now —and they’ll come back one day but we’re moving on to other parts of the market— Lightspeed might be one that actually may benefit both earnings wise and the stock could do at least relatively well because of where they’re situated in the market,” he said.