Lightspeed Commerce has a 173 per cent upside, says ATB

ATB Capital Markets analyst Martin Toner is keeping a “Buy” rating on Canadian e-commerce company Lightspeed Commerce (Lightspeed Commerce Stock Quote, Charts, News, Analysts, Financials TSX:LSPD), saying in a Tuesday note to clients that the just-announced restructuring moves will help support management’s goal of reaching profitability.

Montreal-based Lightspeed Commerce, which has a one-stop commerce platform for SMB merchants helping to facilitate online and physical operations, multichannel sales, expansion to new locations, payments, financial solutions and connections to suppliers, announced on Tuesday reorganization efforts said to streamline its operations. The moves will see a reduction of about 300 employees representing about ten per cent of the company’s headcount-related op ex.

“We have done outstanding work to complete our goal of integrating each brand and rolling out our flagship products to market,” said Lightspeed CEO JP Chauvet in a press release. “This represents three years of hard, foundational work that is setting us up for long-term success. The launch of these flagship products, coupled with our new, leaner structure, will allow us to be more agile and responsive to our customers as we invest in innovations that will fuel our long-term growth.”

Commenting on the announcement, Toner noted that management reaffirmed its third quarter 2023 guidance of between $189 and $194 million in constant currency revenue and an adjusted EBITDA loss of $9 million, with management maintaining it will continue to hire people in the go-to-market and development sections of the business.

Toner said the restructuring will produce a charge of between $12 and $14 million, which will be incurred in the fourth quarter fiscal 2023. Toner noted that half the cost reduction is coming from management layers and that the run rate for LSPD’s sales and marketing and research and development expenses is about $500 million.

“We believe the majority of those expenses are headcount-related and that the operating expense savings from the restructuring could be ~$30 million annually, which would contribute to the Company reaching breakeven ahead of its target of FY2024,” Toner wrote.

“We do not foresee the restructuring negatively impacting revenue growth, however, we note that a large percentage of Lightspeed’s revenue is transaction-based and is economically sensitive. We believe today’s announcement helps protect the Company’s bottom line from the pressure a recession would place on Lightspeed’s customer base and the gross profits from payments,” he said.

With his “Buy” rating, Toner maintained a one-year target price of $60.00 on LSPD, which at the time of publication represented a projected return of 173 per cent.