Lightspeed Commerce is a Buy, says iA Capital

The current risk-reward ratio on Lightspeed Commerce (Lightspeed Commerce Stock Quote, Charts, News, Analysts, Financials NYSE:LSPD) is compelling, says iA Capital Markets analyst Neehal Upadhyaya, who in a Wednesday report reiterated a Top Pick recommendation for LSPD. Investors should benefit from catalysts galore for the stock, Upadhyaya said, while topline growth this year is well above its peer group average. 

Montreal-based Lightspeed has a cloud-based commerce platform offering solutions such as customer engagement, operations management and payments. The company saw its share price take off in the earlier days of the pandemic, but shares have plummeted over the past year-and-a-half to pre-IPO levels. 

The stock is currently trading around the $17-$18 range, but Upadhyaya sees upside from here and is maintaining both a “Buy” rating and $23.00 target price, good for a projected return at press time of 35 per cent. (All figures in US dollars.)

The analyst said Lightspeed continues to focus on higher gross transaction volume (GTV) per location customers with complex needs and workflows, a cohort within which the company has seen robust growth with a year-over-year uptick of 13 per cent over its most recent quarter. That should help generate greater overall annual revenue per user and retention rates going forward, Upadhyaya argued. 

On the catalyst front, Lightspeed has a lot going for it, the analyst said, with the monetization of its NuORDER platform being a key one. Payments from the supplier network will give a boost to revenue for LSPD, according to the analyst, while providing a competitive moat as retailers and restaurants will be able to tap into LSPD’s network to increase their revenues. Upadhyaya paired this longer-term catalyst (latter half of 2024 and early 2025) with closer ones including strong quarterly earnings performances and the milestone of positive adjusted EBITDA, which the company should hit in its fiscal 2024.

“We believe the current risk-to-reward ratio is compelling, as despite the softness in GTV due to a few verticals like bikes and home hardware struggling owing to macroeconomic conditions, the Company has shown it can safeguard its top line with its prudent shift in strategy of targeting higher GTV per location customers, along with having the ability to introduce numerous revenue streams once NuORDER is ready to be commercialized,” Upadhyaya wrote.

For his forecast, Upadhyaya thinks Lightspeed calendar 2024 projected topline growth of 38 per cent is well above its peer group average of 17 per cent. He has estimated Lightspeed’s revenue will go from $548 million in fiscal 2022 (year end March 31) and $731 million in fiscal 2023 to $900 million in 2024 and $1.221 billion in 2025. On adjusted EBITDA, the call goes from negative $33.9 million in fiscal 2023 to positive $10.2 million in 2024 and to positive $47.8 million in fiscal 2025.