Is Lightspeed a buy? (August, 2024)

Following the company’s most recent quarterly results, ATB Capital analyst Martin Toner remains bullish on Lightspeed (Lightspeed Stock Quote, Chart, News, Analysts, Financials TSX:LSPD).

On August 1, LSPD reported its Q1, 2025 results. The company posted Adjusted EBITDA of $10.2-million on revenue of $266.1-million, a topline that was up 27% year-over-year.

“This was my first full quarter returning as Lightspeed’s CEO and I am thrilled to see the volume of capabilities we are releasing for our customers,” CEO Dax Dasilva said. “Lightspeed continues to distinguish itself with advanced inventory management and B2B functionality that we believe no other retail platform can match and in hospitality we are preparing to deliver never-before-seen levels of productivity improvement to streamline restaurant operations.”

The analyst remains optimistic about LSPD’s business.

“Before market open on August 1, LSPD reported Q1/FY25 consolidated revenue of $266.1mm (+27.3% y/y), above consensus of $258.3mm,” he wrote. “LSPD merchants generated $23.6bn (+0.9% y/y) of gross transaction volume (GTV). Adjusted EBITDA of $10.2mm beat consensus and our estimate of $7.3mm, and the Company’s net loss of $35.0mm beat consensus of a $34.5mm loss. Management guided Q2/FY25 revenue of $270mm-$275mm, relative to consensus of $274mm, representing 17%-19% y/y growth and adjusted EBITDA guidance of $12mm beat consensus of $9.5mm. Management also maintained FY25 revenue growth guidance of at least 20%, while FY25 adjusted EBITDA guidance of a “minimum of $45mm” exceeded consensus of $41.8mm and was raised by $5mm. On the call, management talked about improving SaaS revenue growth in H2/FY25, driven by pricing and a renewed focus on selling. Accordingly, the company believes SaaS revenue growth could grow by 10% or more. We believe LSPD’s FY2025 guide should give investors confidence that the Company can expand profitability while continuing to grow at attractive rates. In our view, Lightspeed will be able to produce 20% growth or better, as the customer base remains underserved and the market transitions from legacy solutions towards SaaS based solutions.”

In a research update to clients August 1, Toner maintained his “Outperform” rating and price target of $30.00 on LSPD, implying a return of 64% at the time of publication.

The analyst thinks LSPD will post Adjusted EBITDA of $42.2-million on revenue of $1.09-billion in fiscal 2025. He expects Adjusted EBITDA of $62.3-million on revenue of $1.29-billion in fiscal 2026.

“Our price target represents a 64.0% return to target, and is based on our discounted cash flow (DCF) valuation, using a 14.2% discount rate and 3.25% terminal growth rate. Our discounted terminal value of $1.70bn represents 59.7% of total enterprise value (EV) of $2.84bn, as well as a 7.5 EV/EBITDA multiple, and a 1.4 EV/Revenue multiple,” Toner added.