Lightspeed price target chopped at RBC

With less visibility on its financial outlook, RBC analyst Daniel Perlin has cut his price target on Lightspeed Commerce (Lightspeed Commerce Stock Quote, Chart, News, Analysts, Financials TSX:LSPD).

On March 24, LSPD issued a press release, saying it was revising its financial outlook downward.

“Lightspeed is revising its fiscal 2025 revenue outlook to reflect year-over-year growth of approximately 18 per cent, from the previously expected approximately 20 per cent, primarily due to these impacts on transaction-based revenue,” the company said. “Despite the macroeconomic headwinds, the company remains focused on profitable growth and is pro-actively managing costs. Lightspeed continues to expect fiscal 2025 adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of over $53-million. The company will remain agile in navigating the evolving environment while continuing to execute on its core strengths — delivering innovative commerce solutions, empowering merchants and driving long-term value for stakeholders.”

Perlin assessed the development.

“For the past year, Lightspeed management has made it clear that profitable growth is its highest priority, and it’s a reason for its pivot towards its highest ROI and highest growth verticals,” the analyst wrote. “As the company has delivered on its adj. EBITDA profitability, which we estimate to ramp from $1.3-milllion in FY24 to $53-million in FY25, we expect further proof-points in its ability to drive margin expansion, which in previous commentary suggested incremental mix shift towards software, as well as continued cost optimizations, for which we expect some commentary on AI, particularly for internal operations and customer acquisition. Additionally, management has commented recently that it believes topline growth will be deemphasized relative to gross profit growth as the company drives Subscription revenue growth and benefits from scale. Importantly, management has recently discussed its trajectory in achieving its next leg of profitability in adj. free cash flow, which better positions the company to reinvest for growth, while showing a path to consistent return of capital to shareholders, and for which we could see management providing some framework around.”

As reported by the Globe and Mail, Perlin March 25 maintained his “Outperform” rating on LSPD while chopping his price target on the stock from (US) $20.00 to (US)$15.00.

““We believe that, ultimately, Lightspeed management is looking to reset the narrative surrounding the shares, which has been negatively impacted by a strategic review process that did not result in a sale, as well as a reorganization of the company and weakness in same-store sales,” Perlin concluded. “Moving forward, we could see the company emphasizing a cleaner growth story predicated on 1) growth through its flagship Retail and Hospitality products, with a revamped GTM to drive growth with larger customers; 2) investing in innovation and selling more software to those larger clients, driving mix shift and margin expansion; and 3) tying it all together with an optimized cost base and operating leverage to drive profitable growth. We view the prospects of a clean growth story and path to profitable growth (adj. FCF and GAAP EBIT) as potential catalyst to investors engaging with the stock. On the other hand, the company has to convince investors of its ability to navigate a potentially challenging environment as SMB optimism sinks and the macroeconomic outlook dims.”