Is Lightspeed a takeout target as Dax Dasilva returns?

The return of the company’s founder and original CEO has some thinking about a turnaround. But could Lightspeed (Lightspeed Stock Quote, Chart, News, Analysts, Financials NYSE:LSPD) actually become a takeout target? It’s possible says National Bank Financials analyst Richard Tse.

On February 15, Lightspeed announced Dasilva would return as CEO, replacing JP Chauvet.

“I thank JP for his contributions, service and leadership at Lightspeed over the past eleven years,” said Dasilva. “I founded this company, and am delighted to be named interim CEO to lead this next stage of profitable growth. The achievements of our last quarter serve as a testament to our potential, and we must continue to build upon this momentum. My vision is clear: cultivate a business model that fosters growth, prioritizes profitability and unlocks operational efficiencies to deliver ongoing value to our shareholders.”

Tse said the move doesn’t signal that everything is roses at Lightspeed, in fact just the opposite. But he wonders if it is a prelude to something bigger.

“In our view, we think it’s clear there are structural issues significant enough to see the departure of the CEO and separately the Chief Product and Technology Officer,” the analyst argued. “That alone increases the risk profile. That said, we would note the return of the Founder has some investors thinking Lightspeed is open to pursuing strategic alternatives, including a potential sale – and at the very least a material restructuring; in our view, that narrative is helping fuel the stock price. As for Lightspeed being a target, that would not be unreasonable; we have highlighted that potential in a number of thematic notes over the past year. If we were to run an analysis of how a financial buyer could run this asset for cash, we could see an unlevered value up to US$17, and higher if levered. But that’s all speculation. For now, based on what we see as the current fundamental outlook, we think the risk-to-reward is balanced. Bottom line, despite the negative read from the executive departures when it comes to the underlying business, considerable cash ($749.4 mln; $4.86/share), a likely restructuring on the way and continued acquisition target candidacy, we’re maintaining our Sector Perform rating and US$20 DCF based target. Our target implies 2.0x EV/S on our F25E (unchanged).”

Shares of LSPD on the NYSE closed February 15 up 7.97 per cent to $14.63