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Post 75% Decline, What’s Ahead for Lightspeed Stock?
Stock Analysis & Ideas

Post 75% Decline, What’s Ahead for Lightspeed Stock?

Shares of Lightspeed (TSE:LSPD) have been under immense selling pressure ever since Spruce Point Capital Management accused the company of inflating its key performance metrics, including customer base and ARPU (average revenue per user), among others. 

While Lightspeed’s management termed the short seller’s report “misleading,” difficult year-over-year comparisons and expected moderation in its organic growth rate amid the economic reopening further remained a drag. 

It’s worth noting that Lightspeed stock has corrected over 75% from its high, and it was down about 20% in Thursday’s pre-market session at the time of writing following its Q3 earnings announcement. 

Q3 Results in Brief 

The market’s immediate negative response comes on the back of Lightspeed’s widening losses. Lightspeed’s net loss grew to $65.5 million in Q3 from $42.7 million in the prior-year period. Moreover, it also increased on a quarter-over-quarter basis.  

For context, Lightspeed delivered a net loss of $49.3 million and 59.1 million in Q1 and Q2, respectively.

Nevertheless, Lightspeed’s Q3 revenues increased 165% year-over-year, while gross transaction volume grew 124%. It’s worth noting that Lightspeed’s subscription and transaction-based revenues (accounting for the majority of its income) increased 175% year-over-year. While acquisitions bolstered the segment’s growth rate, organic revenues jumped 74%. 

Now What?

The significant decline in LSPD stock has led to a compression of its valuation multiples. Meanwhile, Lightspeed raised its FY22 revenue outlook and remains upbeat over its organic growth prospects. 

For FY22, LSPD expects revenues to be in the range of $540-$544 million, up from its previous forecast of $520-$535 million. Further, Lightspeed is confident of achieving organic growth of 35-40% in its subscription and transaction-based revenues annually.

LSPD Stock Forecast

Due to its considerable decline in value, LSPD’s stock price forecast on TipRanks shows solid upside potential. The average Lightspeed price target of C$83.71 implies 105.4% upside potential to current levels.

Further, LSPD stock has received 11 Buy, 2 Hold, and 1 Sell Recommendations for a Strong Buy consensus rating.  

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