Lightspeed Commerce (LSPD) has fallen under some pretty considerable selling pressure in recent weeks, with shares nosediving 29% off its peak.
Short-sellers at Spruce Point have taken aim at the company, and broader weakness in high-multiple growth stocks as a result of higher rates in the 10-year Treasury note have made a dent in share prices.
It’s been the perfect storm of adverse events that have caused the previously hot Canadian e-commerce play to reverse in such a brief time.
Given recent negative momentum, and the wild-card risk of having a short-seller targeting the firm, I’m not keen on attempting to time a bottom in LSPD stock. As such, I am bearish on the name. (See Lightspeed stock charts on TipRanks)
LSPD Stock, Blow-off Top
Even after such a massive drop, LSPD stock is still up 156.7% over the past year. The stock is right back to where it was back in early-to-mid August 2021. So, as painful as the sell-off has been, it’s still a tiny blip when you have a glance at the past-year chart.
It’s really hard to tell just how much of the past year of gains the stock will be poised to surrender. Right now, investors are in a rush to take profits off some of the hottest growth stocks for fear that the 10-year note yield will rise substantially, perhaps to the 2-3% range.
Such a scenario would be most devastating to early stage growth companies like Lightspeed.
In terms of the fundamentals, Lightspeed is doing a lot of things right. Still, Spruce Point has more than its fair share of doubts, citing potential accounting issues.
The management team at Lightspeed has since swooped in to the company’s defense, but investors don’t seem convinced.
Cause for Concern
Right now, there are too many things that could go horribly wrong. It’s too early to tell if Spruce Point’s allegations will hold up.
Fellow Canadian e-commerce company Shopify (SHOP) managed to shrug off a short attack from Andrew Left’s Citron Research several years ago. The stock has since gone on to return incredible gains to shareholders who stuck by it.
Given the propensity for short-selling firms to go after Canadian companies, there is a chance that Spruce Point’s claims could be shrugged off. If it’s proven that Spruce Point is right to be concerned about Lightspeed’s accounting practices, there’s no telling how much more downside LSPD stock could have ahead of it.
In any case, Lightspeed stock is still costly at over 57 times sales, leaving it among the most vulnerable to this tech-focused broader market sell-off.
For now, the back and forth between Spruce Point and Lightspeed’s management will continue.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, LSPD stock comes in as a Moderate Buy. Out of 13 analyst ratings, there are 10 Buy recommendations, two Hold recommendations, and one Sell recommendation.
The average Lightspeed price target is C$152.70. Analyst price targets range from a low of C$110 per share, to a high of C$195.00 per share.
Disclosure: Joey Frenette doesn’t own shares of any mentioned companies at the time of publication.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of Tipranks or its affiliates, and should be considered for informational purposes only. Tipranks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. Tipranks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by Tipranks or its affiliates. Past performance is not indicative of future results, prices or performance.
