Up 5%, Is Lightspeed Stock a Buy After Earnings?

Lightspeed (TSX:LSPD) stock rose 5% after positive earnings that beat estimates, yet the CEO says more is it yet to come.

Amy Legate-Wolfe ❯

@amylegatewolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published August 1, 2024 3:30 pm EDT

Montreal-based commerce company Lightspeed Commerce (TSX:LSPD) saw shares rise 5% on Thursday, as the company reported earnings that blew past estimates. Whether it was estimates set out by analysts or the company itself, Lightspeed stock’s returning chief executive officer (CEO) Dax Dasilva proved the company was on the right track.

“The first half is about payments adoption or seeing the fruits of payments adoption,” Dasilva said in an interview with Motley Fool. “EBITDA [Earnings before interest, taxes, depreciation and amortization], we’re ahead of guidance, and we’ve been able to raise guidance for the year … and you’re going to see that continuation of that in Q2.”

So, let’s get into the earnings and what investors have to look forward to.

Earnings beat

Lightspeed stock saw growth across the board for the company’s first quarter of 2025. Revenue came in at US$266.1 million, growth of 27% year over year, passing the forecasted US$255 to US$260 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were also significantly higher at US$10.2 million. This soared past the estimated US$7 million for the quarter and was a huge improvement from the US$7 million loss a year before.

Earnings per share (EPS) were also above estimates, rising to US$0.10 past the consensus of US$0.06. Again, that’s quite the improvement from a loss of US$0.01 the year before.

The company also saw more improvements in key metrics identified by analysts. This would include subscription revenue, which grew 6% year over year to US$83.3 million. While gross transaction volume (GTV) grew just 1% year over year, remaining relatively flat, the company’s flagship platforms saw a 24% increase compared to the same time last year.

“What’s a bright spot for me is that 40% of our customers now are on our flagship platforms,” Dasilva said. “So, that means that our customers are on our flagships, which is the fastest growing segment because every new customer that onboards on Lightspeed on the flagships are automatically on payments.”

Looking ahead

Dasilva noted that while there have been significant improvements across key metrics, there is still more to come. This comes as the company is shifting away from its focus on payments and moving back to onboarding larger clients. This includes focusing on its software once again, which is where the company started, Dasilva said, and where it thrives.

“We’re natively a software company. We know how to sell software. We know how to increase locations, but payments was new for us. So, I think we’ve aced that,” Dasilva said. “We’re doing really well, but now we need to build a pipeline for software growth in the second half of the year.”

These numbers should continue to climb then in the next few quarters, with the end of the year looking quite strong as GTV continues to climb, along with average revenue per user (APRU). This number alone soared quarter over quarter, hitting US$502, a 31% year-over-year increase.

In fact, for fiscal 2025, Lightspeed stock expects to hit at least 20% growth in revenue for the year. The company also raised its outlook to a minimum adjusted EBITDA of US$45 million. For the second quarter, revenue is projected to be between US$270 and US$275 million, with adjusted EBITDA at US$12 million.

Still undervalued

The thing is, even after the increase of 5% in share price, Lightspeed stock is still down significantly. Shares are down 21% in the last year and 88% from all-time highs. Meanwhile, Lightspeed stock continued its commitment to buybacks, aiming for US$140 million of them in the next year. In the first quarter, about 2.7 million shares were purchased for around US$40 million.

Certainly, the company has a lot to prove, but it also works in a unique space within the commerce area, according to Dasilva. And this will likely give it an edge.

“There is more modules coming to the platform. There’s more to upsell. But also, there’s more payments adoption,” Dasilva said. “Mix that together and I think we’ve got a great story that’s developing. It’s only going to increase.”