Lightspeed Commerce will go higher, this investor says

Lightspeed Commerce (Lightspeed Commerce Stock Quote, Charts, News, Analysts, Financials TSX:LSPD) has come a long way over the past 12 months, but don’t think the run is over yet, says David Burrows of Barometer Capital Management. Burrows says this winner of a stock will keep growing as the company continues to expand in the payments and e-commerce space.

“[For] payments companies in Canada, there’s not a lot of choice, but certainly Lightspeed is a real star,” said Burrows, president and chief investment strategist at Barometer, who spoke on BNN Bloomberg on Thursday. 

“It’s a company that we’ve owned for quite some time. And, really, it’s about the best cloud based point of sale software company. They provide end-to-end support for a retailer, bricks and mortar or in the cloud. But bricks and mortar gives them inventory management and payments and so on,” he says.

Lightspeed has been a strong performer over the past year, especially over the fourth quarter of 2020 where the stock more than doubled to reach a little under C$90 per share by the end of December. That put LSPD at a monster return of 149 per cent for the year, which itself came after a 2019 where the stock debuted on the TSX in March and proceeded to deliver a return of 106 for the rest of the year.

2021 has also been perhaps a bit of a surprise to the positive for some investors, with Lightspeed staying flat to negative (like much of the tech sector over) the first stretch of the year. But then came the company’s fiscal fourth quarter results in late May which showed revenue more than doubling on a year-over-year basis. That set the stock off on an upward trend that really hasn’t stopped — Lightspeed is now up about 73 per cent since the May 20 quarterly release.

All that upside might give investors pause, but Burrows is staying bullish on the name and the payments space. 

“They’ve got a very, very good growth rate this year. They’ll improve by about 75 per cent and the estimate for 2023 is up about another 70 per cent,” Burrows said. 

“This is an area that we really like from a relative strength basis. It’s been very, very strong relative to the market. And I think Lightspeed is going to continue to march along and grow both in Canada and around the world,” he said.

Lightspeed announced its first quarter 2022 results on August 5, which showed revenue up a huge 220 per cent year-over-year to $115.9 million. The Q1 net loss was $49.3 million compared to a loss of $20.1 million a year earlier and the adjusted EBITDA loss was $6.0 million compared to a loss of $2.2 million a year earlier. The adjusted net loss was $0.05 per share, which compared to analysts’ consensus expected loss of $0.09 per share. (All figures in US dollars except where noted otherwise.)

“As economies reopen and new business creation accelerates, Lightspeed’s one-stop commerce platform is emerging as the technology of choice for retailers and restaurateurs the world over,” said Dax Dasilva, Founder and CEO, in a press release. “Our customers are entering into a new world of commerce forever altered by COVID-19 and they are turning to Lightspeed to help them simplify their operations, scale their businesses and deliver exceptional customer experiences.”

That topline growth on a comparative basis, more than tripling from a year earlier, was a result of the stark difference between the business environment in mid-2020, where shops were shuttered all over during COVID-19 lockdowns, compared to more recent times where businesses are now opened up across the board.

But the uptick was also due to Lightspeed’s big M&A moves over the past year, where the company bought up a number of US e-commerce platforms including ShopKeep, Upserve and Vend, all of which added bulk to the Lightspeed’s business as it continues its expansion into new markets, including the UK and the EU.

The company has kept up the pace of acquisitions, too, having more recently announced a $500-million deal for US-based e-commerce platform Ecwid along with an agreement to buy NuORDER, a linking platform between merchants and suppliers.

“By joining forces with Ecwid and NuORDER, Lightspeed becomes the common thread uniting merchants, suppliers and consumers, a transformation we believe will enable innovative retailers to adapt to the new world of commerce,” said Dasilva in a June 7 press release.

With the fiscal first quarter release, Lightspeed upped its fiscal 2022 guidance, as well, now calling for overall revenue of between $510 and $530 million compared to the previous estimation of between $430 and $450 million. 

On the fiscal first quarter numbers, BMO Capital Markets analyst Thanos Moschopoulos said the results were impressive.

“It seems like they’re firing on all cylinders,” said Moschopoulos, who spoke to the Globe and Mail after Lightspeed’s fiscal first quarter results. “What surprised them and us was just how quickly things seem to have come back … this is quite a larger beat than I was looking for.”