LSPD stock is still undervalued, National Bank says

Following the company’s second quarter results, National Bank Financial analyst Richard Tse has maintained his “Outperform” rating on Lightspeed (Lightspeed Stock Quote, Chart, News, Analysts, Financials NYSE:LSPD)

On October 2, LSPD reported its Q2, 2024 results. The company posted Adjusted EBITDA of $200,000 on revenue of $230.3-million, a topline that was up 25 per cent over the same period last year.

“Our Unified Payments initiative is proving to be a resounding success. We on-boarded a record number of payments customers in the quarter and are seeing lower than anticipated churn,” said CEO J.P. Chauvet. “The delivery of industry leading products on impressive timelines is validation that our M&A strategy of acquiring and quickly integrating best-in-class companies has been a success. We are now in a position of strength and will focus on growing our business, helping our customers, completing our vision and delivering value to our shareholders.”

Tse said he sees clear progress happening with the company.

“In our view, the results showed the Company is making good on its strategic changes over the past year with the most important being increased capital discipline that was reflected in the material improvement in EBITDA,” he wrote.  “For investors unfamiliar with those strategic changes, they have broadly been: (1) increase Lightspeed Payments contribution; (2) shift its target market to higher GTV merchants (>$500K/year); and (3) move towards breakeven / profitability on an adjusted EBITDA basis. On that, payment penetration was up 330 bps Q/Q (+850 bps Y/Y) to 25.1% helping drive ARPU (ex-Ecwid) up 26% Y/Y to $425. With respect to higher GTV merchants, locations with GTV > $500k/year and GTV >$1 mln/year were up 8% Y/Y and 9% Y/Y, respectively, while those merchants (and locations) with GTV <$200k were down Y/Y. While all positive, most notable in our view was positive Adj. EBITDA with the Company reiterating a commitment to breakeven or better Adjusted EBITDA for F24. In our view, that’s been an essential attribute in the current backdrop when it comes to valuations.”

In a research update to clients November 2, Tse maintained his “Outperform” rating and (US) $20.00 on LSPD, implying a return of 35 per cent at the time of publication.

Tse thinks Lightspeed will post Adjusted EBITDA of $4.3-million on revenue of $930.5-million in fiscal 2024. He expects those numbers will improve to EBITDA of $71.1-million on a topline of $1.19-billion in fiscal 2025.