Last year was tough for technology stocks. Rising interest rates and higher inflation raised recession fears, dragging the stocks down. However, easing inflationary pressure and lower interest hikes have improved investors’ sentiments, driving the stock price of these companies higher. Year to date, Lightspeed Commerce (TSX:LSPD) and BlackBerry (TSX:BB) are trading at 5.7% and 17.5% higher, respectively.
So, with growth stocks back on investors’ radar, is either Lightspeed Commerce or BlackBerry an excellent buy right now?
Lightspeed Commerce
Lightspeed Commerce offers cloud commerce solutions to unify online and physical operations. It also integrates multiple sales channels, global payments, and supplier networks into its platform, thus enhancing customer experiences. Earlier this month, the company reported its third-quarter earnings for fiscal 2023. Its revenue grew by 24% while its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) loss declined from $9 million to $5.4 million.
The expansion of consumer locations, average revenue per user growth, and higher gross transaction value expanded its top line. However, the company’s net losses rose from $65.5 million to $814.8 million, primarily due to a non-cash goodwill impairment charge of $748.7 million. Due to declining consumer spending, the company’s management expects headwinds in the near term.
Meanwhile, Lightspeed’s long-term growth prospects look healthy, as more enterprises are taking their businesses online amid the growing popularity of online shopping. The company is also adding new modules, venturing into new verticals, and growing payments adoption. The company earns around 96% of its revenue from recurring sources, stabilizing its sales.
Further, Lightspeed’s management is working on improving its profitability. It has streamlined its operations and integrated recent acquisitions, which helped slash 10% of its workforce. Amid these cost-cutting initiatives, the company’s management expects to break even or post positive adjusted EBITDA by the next fiscal year. Despite its healthy growth prospects, the company trades at an attractive NTM (next 12-month) price-to-sales multiple of 2.7 and price-to-book multiple of 0.9.
BlackBerry
BlackBerry is a Canadian technology company specializing in cybersecurity solutions and has a solid presence in the IoT (Internet of Things) space. Although the company has been under pressure over the last few months, its long-term growth prospects look healthy amid expanding IoT market. Allied Market Research projects the global IoT market to grow at a CAGR (compound annual growth rate) of 19.7% through 2030.
With its design wins in safety-critical automotive solutions and general embedded domains, BlackBerry is well positioned to expand its market share in the IoT space. Its IVY platform could be a substantial growth driver in the coming years, as it standardizes data generated from various systems across different vehicles, thus helping third-party developers to deliver data-driven services.
Although the company has been losing its market share In the cybersecurity market, its rebuilding efforts are progressing on the right track, as its churn rate improved in the November-ending quarter. So, given its growth prospects, BlackBerry’s management expects its overall revenue to grow at a CAGR of 13% through 2027.
The company’s management expects its gross margin to expand by 100 basis points annually while breaking even in the next fiscal year. Also, the company is optimistic about posting positive EPS and cash flows in fiscal 2025. Meanwhile, the company trades at an NTM price-to-sales multiple of 3.3 and a price-to-book multiple of 1.7.
Conclusion
Given their high growth prospects, I expect both companies to deliver higher returns over the next three years. However, I am more bullish on BlackBerry due to its multiple growth drivers.
