Stock Analysis & Ideas

Lightspeed Stock: Strong Upside Despite Challenges

After months of declines, Lightspeed (TSE:LSPD) stock rebounded and closed about 16% higher on Thursday. Though there was no company-specific news, the overall buying in the beaten-down high-growth sector contributed to this rebound. 

Notably, macroeconomic and valuation concerns, together with fears over the potential raising of interest rates, have recently led to sharp selling in high-growth stocks. Given the significant amount of selling, Lightspeed stock lost about 78% of its value in the past six months. 

Now What?

While Lightspeed has lost a substantial amount of its value in the recent past, it continues to grow its business rapidly. For instance, its revenues increased 165% year-over-year in Q3, reflecting the benefits from acquisitions and ongoing strength in organic sales.

Lightspeed stated that its subscription and transaction-based revenues jumped 175% year-over-year, while organic sales grew 74%. 

LSPD raised its FY22 revenue outlook to $540-$544 million from $520-$535 million. Moreover, the company expects the momentum in organic sales to continue in the coming years. Further, it projects 35-40% growth in subscription and transaction-based organic sales per annum. 

In response to Lightspeed’s recent quarterly performance, BMO Capital analyst Thanos Moschopoulos stated, “We remain Outperform on LSPD following Q3/22 results that were a beat on revenue and EBITDA, while Q4/22 guidance was in line on revenue and light on EBITDA.”

Moschopoulos added that he sees “substantial upside to the stock given its relative valuation and growth” and maintained a Buy rating on LSPD stock. However, he lowered his price target to C$60, citing sector-wide valuation compression. 

Wall Street’s Take

Wall Street is cautiously optimistic on Lightspeed stock. Its Moderate Buy consensus rating is based on 10 Buy, two Hold, and one Sell recommendations. However, due to the significant correction in its price, Lightspeed’s stock price forecast on TipRanks shows strong upside potential.  

The average Lightspeed price target of C$62.75 implies 79.6% upside potential to current levels.

Conclusion

Despite the near-term challenges, LSPD’s core business drivers remain strong, reflected through the continued adoption of its software, growth in its customer base, and organic sales strength. Moreover, valuation compression makes LSPD stock an attractive investment proposition. 

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