Do the math on Lightspeed and it’s still a Buy, this investor says

Canadian e-commerce company Lightspeed Commerce (Lightspeed Commerce Stock Quote, Charts, News, Analysts, Financials TSX:LSPD) has been a rocket lately, effectively doubling over the past four months. That’s good news for shareholders but not so easy on those of us on the outside looking in.

No problem, says David Burrows of Barometer Capital Management, there’s still time to buy it. In fact, Burrows has labelled LSPD as one of his Top Picks for the 12 months ahead, saying the company’s growth trajectory is huge.

“We still have a very significant technology weight at Barometer, and we actually have a fair weight in Canada,” said Burrows, president and chief investment strategist at Barometer, who spoke about Lightspeed on BNN Bloomberg on Thursday.

“I think I used Lightspeed as a pick maybe 18 months ago, and so this is one that we’ve owned for some time. Lightspeed is a natural beneficiary of the reopening,” he said. “Lightspeed sells a suite of products into the retail industry, hospitality, restaurants, gaming, and they help them manage inventory, they help them run their staff, and they’ve made some excellent acquisitions along the way, one of them, specifically in the payments area. So they’re growing their business nicely organically.”

Lightspeed made a big splash of an IPO a few years back and while the stock has been volatile it has definitely rewarded investors who’ve patiently hung on through the ups and downs. Starting at an initial public offering price of $16 in March of 2019, the company raised $179 million from the offering, while the share price immediately started climbing, reaching $40 by July of that year. 

2020 was a superb success for LSPD, with the stock returning 149 per cent and the company growing through a pandemic period that might have seen like a tough time for small and medium-sized businesses, the company’s bread and butter. But that really wasn’t the case. Lightspeed finished its fiscal 2021 (ended March 31) with revenue up 84 per cent from fiscal 2020 and with the company growing through acquisitions over the year and a slew of new features for its platform.

“Fiscal 2021 ended up as one of the most transformative years yet for Lightspeed, with the Company announcing three landmark acquisitions, launching a series of new offerings such as Lightspeed Capital, eCommerce for Restaurants and Order Ahead, listing on the New York Stock Exchange and delivering innovative strategic initiatives such as Supplier Network and the recently announced integration of Google tools directly into the platform,” the company said in its fourth quarter fiscal 2021 press release in May.

“In addition to these key strategic accomplishments and despite the ongoing challenges presented by the global COVID-19 pandemic, Lightspeed delivered strong results in the quarter and the year with small and medium-sized businesses increasingly adopting the Company’s cloud-based commerce platform to enable their omni-channel strategies,” the company said.

Since then, Lightspeed has kept up the pace with its first quarter 2022 showing gross transaction volume across its platforms tripling to $16.3 billion while subscription and transaction-based revenue grew by 218 per cent year-over-year with both organic growth and recent additions Vend, ShopKeep and Upserve also playing a part. 

LSPD’s Q1 2022 revenue was $115.9 million with a net loss of $49.3 million. By segment, the quarter saw Subscription revenue grow to $49.9 million from $23.2 million a year ago, Transaction-based revenue climb to $56.5 million from $10.2 million a year ago and Hardware and Other revenues come in at $9.5 million compared to $2.8 million a year earlier.

“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 first quarter press release on August 5. 

“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,” Dasilva said.

For Burrows, it’s Lightspeed’s Payments solutions that investors should be keeping an eye on, as that business has a lot of runway ahead of it.

“If you look at their revenues, a small portion has been the payments business, but they recently said that they expect to get 50 per cent penetration with their payments product with their existing client base, which, to put a point on it, has payments now about $200 million in 2022. If they got to 50 per cent by 2025 that’d be another $2.5 billion in revenue,” Burrows said.

Burrows said the stock may look pricey but that’s the price you pay for Lightspeed’s high-growth prospects.

“It is the fastest growing company in that space globally, and it probably will continue to trade at a pretty significant premium given the rate of growth that they’re putting up,” he said.