Lightspeed has ‘opportunity everywhere’ going into 2023: analyst
Lightspeed CommerceLSPD.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.
2022 was a terrible year for technology firms, and financial markets in general. The S&P/TSX Capped Information Technology Index, which includes 27 Canadian companies including Lightspeed, Shopify (SHOP)(SHOP.TOConstellation Software (CSU.TOAs of December, it was down 34% in 2022. Many technology companies saw their stock prices plummet, resulting in billions of dollars in shareholder value. Large tech firms in North America have fired tens of thousands of employees.
Montreal-based Point-of-sale software company Lightspeed has not been spared the suffering inflicted upon the sector. The company’s shares were trading at $19 per share in December 2022, down approximately 62%. 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 revisions.”
JP Chauvet is the chief executive of Lightspeed. He succeeded founder Dax Dasilva in February as CEO. Yahoo Finance Canada In November, the company announced that it is focusing on achieving profitability with a multi-pronged approach. 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.”
When it comes to recruiting, the company is also resisting tech market trends. The company reported that it had 360 job openings in November and plans to hire more people 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.
Chauvet still believes Lightspeed has a chance, even in a downturn, because of the efficiency that retailers will seek 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 works as a senior reporter for Yahoo Finance Canada. Follow her Twitter @alicjawithaj.