On Tuesday, UBS has increased the price target for Lightspeed POS Inc. (NYSE:LSPD) shares, a point-of-sale software provider, from $17.00 to $18.00, while maintaining a Neutral rating on the stock.
The adjustment follows the company's fourth fiscal quarter results for 2024, which surpassed expectations for both revenues and adjusted EBITDA.
Lightspeed's Gross Payment Volume (GPV) as a percentage of Gross Transaction Volume (GTV) reached 32%, aligning with the forecast to achieve approximately 30-35% by the end of the fiscal year. The company's management has expressed confidence in reaching a payments penetration of 40-45% in fiscal year 2025.
As part of its strategy to focus on profitable growth, Lightspeed is reallocating some of its expenditures and plans to conclude fiscal year 2025 with over 100 outbound sales representatives.
The company anticipates that by the middle of fiscal year 2025, these sales reps will resume their traditional roles, after having been primarily focused on onboarding new payments customers in fiscal year 2024. Historically, account managers have been responsible for about half of the software bookings in any given period.
Additionally, management highlighted potential opportunities in pricing and packaging for both payments and subscription revenues that are expected to unfold throughout fiscal year 2025.
Lightspeed's management is projecting an acceleration in software revenues, with guidance for first fiscal quarter growth at approximately 7%, consistent with fourth quarter growth rates. By the end of fiscal year 2025, they anticipate a growth rate of 10-15%, driven by the combination of their strategic initiatives.
While UBS acknowledges Lightspeed's strong positioning as a software platform for complex merchants and its potential in embedding financial services, the firm also notes challenges in reaching the non-GAAP EBITDA margin target of around 20%, competition from established players, and the current less favorable lifetime value to customer acquisition cost (LTV/CAC) ratio compared to peers. UBS awaits evidence of successful strategy implementation or easing of macroeconomic pressures.
InvestingPro Insights
Following UBS's updated price target for Lightspeed POS Inc. (NYSE:LSPD), insights from InvestingPro provide additional context for investors considering the stock. Lightspeed's market capitalization stands at approximately $2.35 billion, reflecting investor sentiment and market size. Despite a challenging profitability profile with a negative P/E ratio of -14.47, analysts are optimistic, with nine of them revising their earnings upwards for the upcoming period, suggesting potential for improvement in financial performance.
InvestingPro Tips highlight that Lightspeed holds more cash than debt, which may provide financial stability and flexibility. Moreover, the company's liquid assets surpass short-term obligations, indicating a healthy liquidity position. This is particularly relevant as Lightspeed focuses on profitable growth and reinvestment into its sales force for fiscal year 2025. Additionally, the company's strong return over the last three months, with a 15.98% price total return, may interest investors looking for recent positive momentum in the stock market.
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