Lightspeed has ‘opportunity everywhere’ going into 2023: analyst

Lightspeed, the Montreal-based point-of-sale software provider, has certainly not been immune to the pain inflicted on the technology sector. (Supplied)

Lightspeed Commerce (LSPD.TO) has “opportunity everywhere”, a Raymond James analyst says, making it one of the investment firm’s top technology companies that could see price estimate hikes going into 2023.

The year 2022 was a brutal one for financial markets, but particularly for technology firms. The S&P/TSX Capped Information Technology Index, which includes 27 Canadian companies including Lightspeed, Shopify (SHOP)(SHOP.TO) and Constellation Software (CSU.TO), was down 34 per cent in 2022 as of late December. Many technology companies saw valuations plummet, erasing billions in shareholder value. Tens of thousands of workers have been laid off by large tech firms across North America.

Lightspeed, the Montreal-based point-of-sale software provider, has certainly not been immune to the pain inflicted on the sector. Shares of the company were down approximately 62 per cent in 2022 as of late December, trading around $19 per share. It’s a far cry from the all-time high share price of $158.93 the stock hit in Sept. 2021, before it was attacked in a scathing short seller report.

But Raymond James analyst Steven Li wrote in a research note in late December that there is “opportunity everywhere” when it comes to potential upside for Lightspeed in 2023. He has set an “outperform” rating on the company with a $43 price target.

“Lightspeed certainly faces external factors outside its control that could limit upside revisions,” Li wrote in a note part of Raymond James’ list of Best Picks for 2023.

“However, on balance, with payments monetization inflecting in recent quarters, capital starting to contribute and software (average revenue per user) looking up, we see Lightspeed as one of the better positioned names in terms of potential for positive estimate reviews.”

Lightspeed chief executive JP Chauvet, who replaced founder Dax Dasilva as head of the company in February, said in an interview with Yahoo Finance Canada in November that the company is focused on achieving profitability through a multi-pronged plan. The plan includes consolidating its products under one global brand, expanding payments adoption, working with established small and medium-sized merchants and “ruthlessly” analyzing spending within the company.

“We need to be cautious with every dollar we spend and ensure that we are getting a return on every dollar,” Chauvet said.

“We are ruthlessly looking at the organization and ensuring that every project is not just a ‘nice to have’ but an absolute priority for us.”

The company is also bucking tech market trends when it comes to hiring. In November, the company had 360 open positions and said it planned on hiring more talent through 2023.

“Unlike most companies right now, we aren’t downsizing. We are still a growth story,” Chauvet said.

“That is one of our challenges. We need to attract more talent, but I would say it’s easier than it was a year ago, because we have a lot of big tech companies that are downsizing and cutting jobs. This is going to help companies like Lightspeed.”

CIBC Capital Markets analyst Todd Coupland said Lightspeed has “a credible and reasonable path to near-term profit targets” but noted that the year could still be challenging.

“​​While we applaud Lightspeed’s focus, given the slowing macro trends, we expect (gross transaction volume) growth and customer additions to be lower,” Coupland wrote in a note to clients.

Still, Chauvet has said he sees opportunity for Lightspeed, even in a recession, as retailers seek efficiencies in an economic downturn.

“We’re very focused on attracting the right merchants that will not churn, especially in the context of a potential recession or everybody tightening their belts,” Chauvet said at the time.

“I want to be sure we are putting our marketing dollars towards attracting the right customers that are going to have the better returns.”

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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