Lightspeed downgraded at National Bank

Following a quarter that fell a little short of his expectations, National Bank Financials analyst Richard Tse has downgraded Lightspeed Commerce (Lightspeed Commerce Stock Quote, Chart, News, Analysts, Financials NYSE:LSPD).

On February 8, Lightspeed reported its Q3, 2024 results. The company posted Adjusted EBITDA of $3.6-million on revenue of $239.7-million, a topline that was up 27 per cent over the same period last year.

“Over all, I was very pleased with the quarter. We were able to grow the top line by 27 per cent and our disciplined approach on costs helped us deliver positive adjusted EBITDA performance,” said CFO Asha Bakshani. “As we begin to turn our attention to fiscal 2025, we will focus on growing our top line without sacrificing the progress we have made on adjusted EBITDA profitability.”

Tse gave his take on the quarter.

“Lightspeed reported FQ3 results that were essentially in line with Consensus but short of our expectations,” he said. “In our opinion, the results show Lightspeed executing on its Payments focus this fiscal year. The issue, and why the stock is down at the time of writing is with respect to broad incremental comments around the F25 outlook which to us, sounded cautious. Management pointed to (new, and in our view, unexpected) investment into sales and marketing to accelerate merchant (location) additions. Because of that investment, we think margins will compress in H1/F25 while adding uncertainty for its eventual conversion into location growth. Overall, we think that’s creating an overhang. Additionally, the increasing likelihood of new acquisitions also increases the risk profile.”

In a research update to clients February 8, Tse downgraded LSPD from “Outperform” to “Sector Perform” and lowered his price target on the stock from (US)$25.00 to $20.00.

The analyst thinks LSPD will post Adjusted EBITDA of $800,000 on revenue of $905.3-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $33.9-million on a topline of $1.14-billion the following year.

“Bottom line, we think the FY25 (Mar) investments will likely weigh on margins and growth in the first half of F25 with added uncertainty for the second half of F25,” Tse concluded. “Our revised estimates reflect that new information from today’s conference call — altogether, that new (and incremental) risk profile and its impact on our estimates has us downgrading the name to Sector Perform (from Outperform). Our target price goes to US$20 from US$25.”