Lightspeed (TSX:LSPD): Can the Tech Stock Turn a Corner in 2022?

Lightspeed Commerce (TSX:LSPD)(NYSE:LSPD) is one of many top Canadian perfomers that saw its rally be derailed at the hands of a short-seller.

| More on:

Abstract Exploding Pixel Connection Communication 5G Energy Network Computer Smart City Pattern Internet Technology Background Light Beams Neon Blue Zoom Effect Fractal Art Futuristic Texture Template for presentation, flyer, card, poster, brochure, banner

Some of the best-performing Canadian tech stocks are now down by deep double digits after a brutal sell-off in fast growers. Indeed, valuation always matters, and while growth investing is more challenging, given future cash flows, growth prospects, and margin trajectories are harder to pinpoint, one must always attempt to estimate a growth stock’s intrinsic value. Otherwise, one will be at risk of overpaying, perhaps by a considerable amount over intrinsic value. Indeed, paying-up any price for growth is a risky proposition, but one that can come with incredible returns, as we saw back in 2020. With high-multiple now falling back to Earth, many investors are wondering if now is the time to be a buyer of the dip, or if negative momentum will build up on itself.

Of course, not all companies are built the same. Some may have growth profiles that justify their incredibly lofty multiples. Some may be prone to upside surprises and be worth an even larger premium. After many months of excessive selling, I do think it’s a wise idea to put some of the best Canadian tech stocks on one’s radar. While catching a falling knife is always a risky proposition, getting a bit of skin in the game with a dollar-cost averaging (DCA) approach may be a wise idea. That way, investors can average down their cost bases on the way down and not be on the receiving end of what could be a continued sell-off.

When the shorts attack!

In this piece, we’ll have a look at one short-seller-targeted Canadian tech stock that lost a major step. Indeed, U.S. short-selling firms setting their crosshairs on Canadian companies has been quite a theme in recent years. While short-seller allegations are horrific for shareholders, they don’t always represent “curtains” on a company’s ascent. Indeed, short-seller reports are not to be taken as gospel. Still, they must be analyzed so investors can come up with their own takeaways. Often times, shares of a short-targeted firm may not deserve to be sold off so viciously either due to a lack of a “smoking gun” or minor claims that are overblown beyond proportion.

Consider Lightspeed Commerce (TSX:LSPD)(NYSE:LSPD), a Canadian tech stock that has been feeling the blow of the shorts of late.

Lightspeed Commerce

Commerce enabler Lightspeed is now down over 65% from its high, thanks in no part to Spruce Point Capital, which targeted the white-hot momentum stock that doubled up many times over since bottoming in March 2020. The firm who was short LSPD stock, claimed that Lightspeed overstated on a number of metrics, ranging from customer count and even TAM (Total Addressable Market). Spruce Point also stated that Lightspeed’s reports included “inaccuracies.”

Undoubtedly, the report was alarming, and Lightspeed’s growth did seem too good to be true. That said, I think it’s too soon to tell if it’s Lightspeed’s or Spruce Point that have the inaccuracies. In any case, prudent investors should stay away from LSPD stock as there just aren’t many catalysts baked in going into 2022. Further, Spruce Point seems unlikely to back away anytime soon, and a subsequent short report or public appearance on a financial TV show could apply even more pressure on the name.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Lightspeed Commerce.

More on Investing

investment research
Dividend Stocks

Best Stock to Buy Right Now: TD Bank vs Manulife Financial?

TD and Manulife can both be interesting stock picks for today, depending on your investment style.

Read more »

A worker gives a business presentation.
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These stocks are out of favour but could deliver nice returns over the coming years.

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 5.5 Percent Dividend Stock Pays Cash Every Month

This defensive retail REIT could be your ticket to high monthly income.

Read more »

Confused person shrugging
Dividend Stocks

Passive Income: How Much Do You Need to Invest to Make $600 Per Month?

Do you want passive income coming in every single month? Here's how to make it and a top dividend ETF…

Read more »

Canadian Dollars bills
Dividend Stocks

3 Monthly-Paying Dividend Stocks to Boost Your Passive Income

Given their healthy cash flows and high yields, these three monthly-paying dividend stocks could boost your passive income.

Read more »

ways to boost income
Investing

Are Telus and BCE Stocks a Smart Buy for Canadian Investors?

Telus (TSX:T) and BCE (TSX:BCE) have massive dividend yields, but their shares have been quite sluggish!

Read more »

investment research
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

Is OpenText stock poised for a 2025 comeback? AI ambitions, a 3.8% yield, and cash flow power make it a…

Read more »

Make a choice, path to success, sign
Dividend Stocks

The TFSA Blueprint to Generate $3,695.48 in Yearly Passive Income

The blueprint to generate yearly passive income in a TFSA is to maximize the contribution limits.

Read more »