On Wednesday, Barclays reiterated its Overweight rating and $20.00 price target for Lightspeed POS Inc. (NYSE: NYSE:LSPD), following reports that the company is exploring strategic options, including a potential sale. The point-of-sale software provider has been the subject of takeover rumors for several months, especially after CEO Dax Dasilva indicated earlier this year that Lightspeed was open to discussions about a potential acquisition.
Lightspeed's performance has been lackluster year-to-date, with shares decreasing by 26% compared to a 9.5% increase in the IGV software index. The company's revenue growth has not yet returned to the levels seen in early 2023, which has been attributed to a challenging macroeconomic environment and specific difficulties in the software sector's growth.
Despite these challenges, the recent return of Dax Dasilva as CEO has been viewed positively, as new management efforts are concentrated on cost control and margin improvement. These changes are likely to attract interest from private equity firms, which were mentioned as possible buyers in the Reuters report. The company's renewed focus on software sales, after a previous emphasis on payment solutions, is part of this strategic shift.
Lightspeed possesses various assets that could be attractive to larger companies, which may lead to considerations of a sale amid intense competition and the ongoing tough economic climate. The company's current valuation stands at 1.4 times the CY25 EV/Sales based on Barclays' estimates, suggesting that strategic and private equity buyers might find Lightspeed an appealing acquisition target.
In other recent news, Lightspeed Commerce has reported notable financial growth, with a 27% year-on-year increase in Q1 Fiscal 2025 revenue to $266.1 million, surpassing expectations. The company also saw a positive adjusted EBITDA of $10.2 million, a significant improvement from a $7 million loss in the same period last year.
Benchmark has initiated coverage on Lightspeed, assigning a Buy rating based on a valuation metric applying a 3x enterprise value to revenue multiple to the company's forecasted fiscal year 2026 revenue of $1.281 billion. Meanwhile, Piper Sandler has maintained a Neutral rating on Lightspeed's stock, though it reduced its price target from $17.00 to $15.00.
This adjustment comes after Lightspeed's successful focus on Unified Payments, which has seen its Gross Payment Volume penetration rise from 20% to 36%. In terms of strategy, Lightspeed is shifting its focus to growing its subscription base, planning price increases, and implementing a renewed outbound sales strategy. The company's management is optimistic that these initiatives will boost the subscription revenue growth rate to over 10%.
InvestingPro Insights
As Lightspeed POS Inc. (NYSE: LSPD) navigates through a period of strategic evaluation, the latest metrics from InvestingPro highlight a mixed financial landscape. With a market capitalization of approximately $2.36 billion, the company's valuation reflects its position in the market. While Lightspeed's price-to-earnings (P/E) ratio stands at a negative -15.9, indicating that it is not currently profitable, analysts are optimistic, predicting profitability this year. This sentiment is bolstered by the fact that 8 analysts have recently revised their earnings estimates upwards for the upcoming period.
On the balance sheet, Lightspeed holds more cash than debt, providing some financial flexibility in these uncertain times. This is complemented by the company's liquid assets surpassing short-term obligations, which could be a crucial factor in weathering any short-term economic headwinds. Despite not offering a dividend, which might deter income-focused investors, the company's strong revenue growth of over 26% in the last twelve months, as of Q1 2023, signals potential for future expansion and could be a key consideration for potential acquirers or investors looking for growth opportunities.
For those interested in deeper analysis and more insights, InvestingPro offers additional tips on Lightspeed, which can be found at InvestingPro's dedicated Lightspeed page.
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