Benchmark has initiated coverage on Lightspeed POS Inc. (NYSE: NYSE:LSPD), assigning a Buy rating and setting a price target of $20.00.
The firm's analysis highlighted Lightspeed's status as a global provider of cloud-based point-of-sale (POS), e-commerce, and payment solutions.
Lightspeed focuses on serving small- and medium-sized businesses (SMBs) and enterprise firms, particularly those in retail, restaurant, and hospitality sectors.
The company targets sophisticated merchants with complex operations, such as those with multiple locations and extensive inventory management needs, which Lightspeed refers to as its ideal customer profile (ICP).
These businesses are characterized by their high product counts and significant sales volumes.
Benchmark's optimistic outlook is based on a valuation metric, applying a 3x enterprise value (EV) to revenue multiple to Lightspeed's forecasted fiscal year 2026 revenue of $1.281 billion.
According to the firm, the stock is currently undervalued, trading at only 1x estimated 2025 EV/sales, which is significantly lower than the peer average of around 4.3x.
The valuation comes in the context of Lightspeed's stock performance, which has seen a substantial decline of nearly 39% year-to-date. This drop is in contrast to the broader market, with the S&P 500 index having risen by 18.1% over the same period.
In other recent news, Lightspeed Commerce has been making significant strides in its financial performance. The company reported a 27% year-on-year increase in revenue to $266.1 million for Q1 of Fiscal 2025, surpassing projections. This impressive performance is reflected in its positive adjusted EBITDA of $10.2 million, a marked improvement from a $7 million loss in the same period last year.
Piper Sandler, an independent analyst firm, has maintained a Neutral rating on Lightspeed's stock, though it has reduced its price target from $17.00 to $15.00. This comes after Lightspeed's successful focus on Unified Payments, which has seen its Gross Payment Volume (GPV) penetration rise from 20% to 36%.
In terms of strategy, Lightspeed is shifting its attention 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
Adding to Benchmark's positive assessment, InvestingPro data provides a nuanced picture of Lightspeed POS Inc. (NYSE:LSPD) that could be instrumental for investors seeking to understand the company's financial health and market position. With a market cap of $1.95 billion, Lightspeed's valuation is a critical factor to consider. Despite a negative P/E ratio, which currently stands at -13.14, reflecting the company's lack of profitability over the last twelve months, analysts are optimistic about the company's future. The expectation that Lightspeed will turn profitable this year is supported by the fact that 8 analysts have revised their earnings upwards for the upcoming period.
Investors should note the company's strong liquidity position, as Lightspeed holds more cash than debt on its balance sheet and has liquid assets that exceed short-term obligations. This financial stability is an important consideration, especially when the stock price movements are known to be quite volatile. Furthermore, the revenue growth of 26.19% over the last twelve months as of Q1 2023 indicates that the company is expanding its financial base, which may contribute to future profitability.
For those interested in more detailed analysis and additional metrics, InvestingPro offers further insights. There are currently 6 more InvestingPro Tips available, which can be accessed for a deeper dive into Lightspeed's financials and market performance. Visit InvestingPro for a comprehensive set of tools designed to aid in making more informed investment decisions.
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