By Benchmark has commenced coverage on Lightspeed Commerce Inc (NYSE: LSPD) with a Buy rating and a price target of $20, representing a potential upside of over 50% from its current stock price of $12.85, as of Monday’s close.
Analyst Mark Palmer highlights significant growth prospects for Lightspeed, particularly in light of the company’s recent emphasis on enhancing profitability and driving organic growth.
Palmer’s positive outlook is largely attributed to Lightspeed’s robust transaction-based revenue growth in recent quarters.
The company, which offers cloud-based point-of-sale (POS), e-commerce, and payment technologies, has seen increased traction among retailers and restaurants.
Palmer anticipates a rebound in subscription-based revenue growth, fueled by Lightspeed’s renewed focus on this segment.
Return of founder to Lightspeed
A pivotal factor contributing to the optimistic forecast is the return of founder Dax Dasilva as CEO in February 2024.
Dasilva, who led the company from its inception in 2005 until February 2022, has shifted the company’s strategy towards enhancing profitability and reducing reliance on large-scale mergers and acquisitions.
The current strategy emphasizes organic growth and broadening the adoption of Lightspeed’s integrated POS and payments platform.
Lightspeed’s Q1 2025 earnings
In its most recent quarterly earnings report for Q1 Fiscal Year 2025, Lightspeed posted total revenue of $266.1 million, reflecting a 27% year-over-year increase and surpassing the company’s projections.
The company achieved positive adjusted EBITDA of $10.2 million, exceeding the anticipated $7 million and showing a significant turnaround from a $7.0 million loss in the same quarter the previous year.
Net loss also improved to $35.0 million.
Transaction-based revenue surged by 44% year-over-year to $174.1 million.
Additionally, the Gross Payment Volume (GPV) as a percentage of Gross Transaction Volume (GTV) rose to 36% from 22% the previous year, indicating greater adoption of Lightspeed Payments.
The Average Revenue Per User (ARPU) increased by 31% year-over-year to approximately $502, reflecting successful upselling and a focus on high-GTV customers.
Operational advancements included the launch of new features such as an omnichannel loyalty program, enhanced inventory management tools, and AI-powered photo enhancements for e-commerce.
The company also repurchased approximately 2.7 million shares for around $40 million, signaling confidence in its stock.
Lightspeed Q2 outlook
Looking ahead, Lightspeed projects revenue between $270 million and $275 million for Q2, with adjusted EBITDA expected to be around $12 million.
For the full fiscal year, the company forecasts at least 20% revenue growth and a minimum adjusted EBITDA of $45 million.
These projections suggest continued growth and a path toward profitability.
However, challenges include a competitive landscape with both traditional POS providers and newer cloud-based entrants, as well as macroeconomic factors like consumer spending trends and global economic conditions.
Despite these headwinds, Lightspeed’s strong cash position of $673.9 million and lack of debt provide a solid buffer.
LSPD stock valuation
From a valuation perspective, the stock trades at a lower Enterprise Value-to-Sales multiple of 1.30 compared to some peers, possibly due to its lower operating margins.
Yet, with improving financials and a strategic focus on high-growth areas, the stock may be undervalued, presenting the potential for investors seeking exposure to the POS and payment solutions market.
With its solid fundamentals, strategic leadership, and favorable market outlook, Lightspeed Commerce is positioned for promising growth.
The company’s efforts to enhance profitability and drive organic expansion make it a noteworthy investment opportunity.
In the next phase of analysis, examining the stock’s technical aspects will provide further insights into its price trajectory and investment potential.
LSPD stock technical analysis
After an extended downtrend that saw it crashing from above $120 to below $20, Lightspeed Commerce‘s stock has been trading in a narrow $12-$18 range since the start of 2023.
Source: TradingView
Currently, the stock is trading at the lower end of this range and below its major 100-day and 200-day moving averages indicating weakness.
Taking that into account, investors who have a bullish outlook on the stock like the analysts at Benchmark can either wait for it to close above its 100-day moving average to indicate a change in momentum or they can initiate a small position here with a stop loss below the recent swing low at $11.65.
Traders who are bearish on the stock and want to initiate fresh short positions can do so on a bounce back to levels near $14.2 with a stop loss at $15.7.
If the stock breaks below its long-term range decisively, it can fall to $9.4, where one can book profits.
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