In the world of payment processing, Lightspeed POS (LSPD) is an industry behemoth. The company’s focus on providing hardware and software solutions to small and medium-sized businesses (SMBs) to digitize their offerings is much-needed. Indeed, Lightspeed’s existing market positioning has been very fruitful during the pandemic. (See Lightspeed stock charts on TipRanks)
Investors can think of Lightspeed as a smaller niche competitor to other POS omnichannel players such as Square (SQ). That said, the company’s business model has been shifting of late.
Let’s take a look at what sort of moves Lightspeed has been making, and whether this company has a shot to dominate the e-commerce space in a similar fashion to Canadian peer Shopify (SHOP).
Lightspeed’s Business Model Is As High Growth As It Gets
But first, let’s discuss Lightspeed’s existing business model.
The company’s core focus for years has been on growing its market share in the point of sale (POS) business. Lightspeed’s recurring SaaS revenue streams, which arrive via sales of its hardware and software services as a package, are really the attraction for many long-term investors.
Lately, Lightspeed has grown its hospitality and retail-oriented POS market share largely through acquisitions. In fact, Lightspeed’s rate of acquisition growth is impressive. The company’s recent significant acquisitions include Upserve and Shopkeep, which have grown the company’s restaurant and hospitality market share in the cloud commerce/POS space.
Furthermore, the range of products and services Lightspeed provides in addition to its POS hardware/software business are impressive. These include inventory management, loyalty programs, analytics, payments, and customer relations, among other businesses. Each provides robust recurring revenues, which growth investors increasingly seek.
As Lightspeed continues to grow its core footprint, investors have seen significant revenue growth. This past quarter, the company’s revenue growth rate was 127% year-over-year. Those kind of growth rates are hard to find, and investors have reason to like this stock on the basis of the company’s core business alone.
That said, let’s dive into that aforementioned e-commerce catalyst to see if more growth is on the horizon for investors in LSPD stock.
Recent Acquisitions Bullish for E-Commerce-Focused Investors in LSPD Stock
The company’s recent deals to acquire Ecwid and NuOrder for a combined $925 million is a big deal. Aside from the price tag, these deals could turn out to be complete game changers for Lightspeed.
Why?
Well, Lightspeed’s strategic outlook has shifted as a result of these deals. Of the two deals, Ecwid is perhaps the more interesting of the two in this regard. Ecwid’s business model is similar to rival Shopify, in that it allows SMBs the ability to set up shop online. Given Lightspeed’s existing product portfolio, the obvious synergies with this deal have many growth investors salivating at the potential.
As per the press release on these deals, both companies have shown impressive growth rates in recent years (hence the massive premium paid by Lightspeed to acquire these companies). Ecwid’s year-over-year growth rate of 50% is substantial, and should provide accretive growth off the bat to Lightspeed.
As part of the deal, Lightspeed gets access to 130,000 paying customers on the Ecwid platform and 100,000 retailers on the NuOrder platform. The cross-selling potential of these deals alone is intriguing. However, the vertical integration these acquisitions provide is perhaps the item of note for many investors.
What Analysts Are Saying About LSPD Stock
According to TipRanks’ analyst rating consensus, LSPD stock comes in as a Strong Buy. Out of 10 analyst ratings, there are 8 Buy recommendations and 2 Hold recommendations.
As for price targets, the average Lightspeed price target is $94.07. Analyst price targets range from a low of $80.00 per share to a high of $120.00 per share.
Bottom Line
As SMBs continue to drive more volume from omnichannel platforms, Lightspeed stands to benefit. However, the company’s recent aggressive moves into e-commerce pave the way for even more outsized growth.
The question with Lightspeed right now is whether the company can effectively grow into its valuation. That’s a more difficult question to answer presently. That said, if the company’s historical growth track record can be sustained, anything is possible.
Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
