3 Reasons to Buy Lightspeed Stock Like There’s No Tomorrow

Written by Sneha Nahata at The Motley Fool Canada

If you are looking for Canadian stocks with solid fundamentals and promising growth potential, Speed ​​of light (TSX:LSPD) should be on your radar. As a leading cloud trading platform provider, Lightspeed is likely to benefit from the ongoing shift to omni-channel sales models, making it an attractive option for long-term investors.

Despite macro headwinds that have caused the stock to fall about 38% year to date, Lightspeed continues to show strong revenue growth. In addition, its focus on sustainable earnings and low valuation make it an attractive option for long-term investors.

With that in mind, let’s take a look at three reasons why you should buy Lightspeed stock now.

Reason #1: Strong sales growth is set to continue

Lightspeed, with its comprehensive solutions—including omnichannel capabilities, point-of-sale (POS) systems, inventory management, and financial products like Lightspeed Payments and Lightspeed Capital—is likely to benefit from the growing trend toward omnichannel platforms. That will support the tech company’s revenue growth.

Lightspeed is expected to see strong demand for its POS and payments solutions as more and more small and medium-sized enterprises (SMEs) adopt digital solutions and modernize their payment systems.

Lightspeed reported an impressive 27% revenue growth in the first quarter of fiscal 2025. This growth reflects the growing adoption of its unified payment and POS solutions, and is expected to continue, providing a solid foundation for sustainable growth.

The important point is that the company’s gross payment volume grew 64% year-over-year in Q1, reaching $8.4 billion, as more businesses chose to process payments with Lightspeed Payments. Furthermore, Lightspeed’s payment solutions now account for 36% of its total transaction volume, indicating significant room for expansion.

In addition to payments, Lightspeed’s financial services, including Lightspeed Capital, are also gaining traction. With growing adoption of financial products and increasing payment penetration, the company is well-positioned to continue delivering strong sales results in the coming years.

The story continues

Reason #2: Moving Towards Sustainable Profitability

Lightspeed is making significant progress toward achieving sustainable profitability. Over the past few quarters, the company has shown steady improvements, particularly in adjusted EBITDA, which has increased for four consecutive quarters. In addition, Lightspeed has managed to reduce losses.

With a growing revenue base and improved cost control, Lightspeed is improving its operating leverage, which will drive future record adjusted EBITDA. The company’s growing payment penetration and efficiency initiatives are also contributing to its profitability goals.

In addition, Lightspeed focuses on high gross transaction volume (GTV) customers who are more likely to stay on the platform long-term and adopt multiple Lightspeed services. This focus helps increase average revenue per user (ARPU) and sets the stage for sustainable profit growth.

Reason No. 3: Acquisitions and attractive valuation

Acquisitions play a key role in Lightspeed’s growth strategy, allowing the company to expand its customer base, enhance its product offering, and strengthen its market position. Lightspeed has a long history of successfully integrating acquired businesses, which bodes well for its future.

What makes Lightspeed even more attractive is its current valuation. The stock is trading at an enterprise value to sales (EV/Sales) multiple of 1.1, which is well below its historical average. This presents an attractive buying opportunity for investors looking to buy into a multi-year low.

Summary

Lightspeed is well-positioned for long-term growth thanks to increasing adoption of its trading solutions, improving profitability, and strategic acquisitions. With a low valuation, now may be a great time to consider Lightspeed for your investment portfolio.

The article 3 Reasons to Buy Lightspeed Stock Like There’s No Tomorrow first appeared on The Motley Fool Canada.

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Fool contributor Sneha Nahata has no position in any stocks mentioned. The Motley Fool recommends Lightspeed Commerce. The Motley Fool has a disclosure policy.

2024