Has Lightspeed Commerce hit bottom yet?

One of the stocks that seems to typify the current market mood on technology would be Canadian e-commerce company Lightspeed Commerce (Lightspeed Commerce Stock Quote, Charts, News, Analysts, Financials TSX:LSPD), which has been hammered in recent months as investors continue to turn away from high-growth names. 

The slide has certainly been tough on LSPD shareholders, but for those investors waiting in the wings for the bottom to be hit, portfolio manager Bruce Campbell isn’t sure we’re there yet.

“We don’t own Lightspeed right now. We have owned it in the past and we did quite well with it. We really like the company and we like what they do,” said Campbell, president of StoneCastle Investment Management, who spoke on BNN Bloomberg on Wednesday.

“They’re trying to help select industries — the restaurant industry is probably the biggest — as far as being more productive and they do so at a fairly reasonable price for the actual restaurant,” Campbell said. 

Montreal-based Lightspeed has had quite a year and a half, with the point-of-sale company expanding greatly through major acquisitions in the United States and seeing its quarterly revenue — as well as the company’s share price — head northward at breakneck speed.

But the past number of months have been less rosy, first with the publishing of a short-seller report this past September that questioned the company’s financial reporting metrics and then with an overall pullback on growth stocks. Those issues plus muted guidance from the company in a quarterly report served to rip a hole in the stock in early November, one which has just grown wider during the last three and a half months. All told, LSPD went from a pre-pandemic value of about C$36 to C$153 per share by September 2021 and has now fallen all the way back and then some, currently trading at around the C$32 mark.

“If you look at what happened during the pandemic when everything originally started in March of 2020, everyone was concerned about what that meant for the future of restaurants,” Campbell said. “Things were very uncertain and the stock dropped and it really dropped a lot, similar to what we’ve just seen happen.”

Campbell said the more recent pullback on LSPD came about from a different set of factors related to a change of mindset by investors in terms of what they’re looking for in a stock, namely, something with a reasonable multiple.

“The challenge is that the market right now is taking down these technology stocks that are very high multiple. It’s worried about interest rates, the future and geopolitical events and so people are just selling first, asking questions later,” he said.

“Lightspeed is a good company. It’s one that we don’t own right now but we certainly are watching and I guarantee you that there’ll be a time that we step back into it. I just don’t know if that’s here or if it’s $10 higher or lower than where it is right now,” Campbell said.

“We’re really going to watch to see when it bottoms and when it looks like it’s starting to re-accelerate and when the market is in a happier place for high multiples than it is right now,” he said.

Lightspeed delivered fiscal third quarter 2022 results earlier in February, showing total revenue up 165 per cent year-over-year to $152.7 million and subscription revenue up 123 per cent to $68.6 million. The company’s quarterly net loss came in at $65.5 million compared to a net loss of $42.7 million a year earlier, while the adjusted EBITDA loss was $7.1 million compared to a loss of $6.6 million a year ago. (All figures in US dollars except where noted otherwise.)

The quarterly top and bottom numbers were beats of analysts’ expectations where the consensus calls were for $143.1 million in revenue and $10.9 million in negative EBITDA.

Lightspeed announced at the same time as the earnings that its founder Dax Dasilva would be leaving the CEO role and taking up the executive chairman position, promoting president Jean Paul Chauvet to CEO. The company said the move was part of its long-term succession planning.

“In his nine years at Lightspeed, [Chauvet] has proven his strategic acumen, pioneered our go-to-market strategy, led our product teams, and played a critical role in launching Lightspeed Payments,” said Dasilva in a February 2 press release. “We are fortunate to continue benefiting from his leadership, expertise and dedication as Lightspeed builds on its momentum in a large and evolving market. It has been an honour for me to lead the talented Lightspeed team since founding the Company in 2005 and I look forward to leading in my new capacity of Executive Chair.”