What price could Lightspeed command?

With Lightspeed (Lightspeed Stock Quote, Chart, News, Analysts, Financials NYSE:LSPD) potentially on the block, what could the company command in the open market?

On September 25, LSPD addressed the rumours it said were surrounding it.

“While it is the long-standing policy of Lightspeed Commerce not to comment on market rumours, the company notes the recent media reports concerning a potential transaction involving the company,” the company said. “Lightspeed Commerce periodically undertakes, and is currently conducting, a strategic review of its business and operations with a view to realizing its full potential. In this context, the company has engaged, and may continue to engage, in discussions relating to a range of potential strategic alternatives. The board of directors of Lightspeed Commerce is committed to acting in the best interests of the company and its stakeholders. The company does not intend to issue or disclose developments with respect to any of the above matters except as required under its regulatory obligations.”

National Bank Financial analyst Richard Tse tackled the question of LSPD’s value in a research update to clients September 25.

“As of market close, Lightspeed is trading at 1.6x EV/Sales and 4.0x EV/Gross Profit (~40% Gross Margins) on CY24,” he wrote. “For context, while not a direct comp, an adjacent name Nuvei is being acquired by Advent International at an implied valuation of 4.3x EV/Sales and 5.3x EV/Gross Profit (~81% Gross Margins) on CY24. Despite the lower margin profile, given Lightspeed’s growth rate and broad set of applications, it’s not unreasonable to think it could command an equivalent valuation. We’d note our recent meeting with Management (see Local Tech is Alive and Well) had the Company confirming a focus on accelerating software revenue growth by doubling its outbound sales team and leveraging cross-selling opportunities. As such, we could see a range of 2.1x-2.5x EV/Sales (equivalent 5.0-6.0x EV/Gross Profit which would imply a potential takeout price of approximately US$18.50 – US$21.30 (approximately 18-36% above today’s closing price).”

With the report, Tse maintained his “Sector Perform” rating and price target of (US) $16.00 on LSPD.

“While the above speculation is reflected in the stock price move (higher) today, we’ll look to reassess our rating and target,” he added. “For now, we’re maintaining our Sector Perform rating and US$16 DCF based price target. That DCF-based target implies a valuation on EV/Sales of 1.6x on F25E.”