Is It Still Prudent to Invest in Lightspeed Commerce?

TSX’s technology sector has picked up steam after the first quarter of 2024. The sector is up 13.6% following solid gains in the last three (+13.6%) and six (+9.7%) months, respectively. However, an e-commerce software provider and software payments firm has lagged and did not go with the flow.

Lightspeed Commerce (TSX:LSPD) was once a potential tech superstar. Because of some misfortune, including a short-seller attack, the growth stock produced a negative 85.6% return in three years. Investors who still own the stock are down 20.5% year-to-date. Is it still prudent to take a position and bet on a recovery?

Tech unicorn

Lightspeed Commerce was described as a tech unicorn when it went public in March 2019. It raised $240 million from the initial public offering ($16 per share). Seeing the growth potential of the one-stop commerce platform for merchants, the company changed its name from Lightspeed POS to Lightspeed Commerce.

Its founder, Dax Dasilva, said then, “We evaluated our company name in light of the full scope of solutions we offer today. Lightspeed is no longer simply a point-of-sale solution, and we’ve outgrown Lightspeed POS.” He added the company name should align with the current offerings and management’s long-term vision.

Unfortunately, net loss from operations reached US$1 billion in fiscal 2023. However, in fiscal 2024 (12 months ending March 31, 2024), the net loss dwindled 84.9% year-over-year to US$164 million. The silver lining was the 24% revenue increase to US$909.3 million.

Management exceeded the revenue outlook and achieved a positive full-year adjusted EBITDA for the first time. Asha Bakshani, CFO of Lightspeed Commerce, said the revenue forecast in fiscal 2025 is over the US$1 billion mark.

Also, in Q4 fiscal 2024, Lightspeed made AI-powered configuration recommendations, and implemented margin-based pricing and new payment links (pay anywhere, anytime). Notably, the Board of Directors reappointed Dax Dasilva as permanent CEO.

Latest financial performance

Lightspeed Commerce trades at $22.31 per share, gaining 17.7% in the last three months. In Q1 fiscal 2025 (three months ending June 30, 2024), total revenue increased 27% year-over-year to US$266.1 million, while net loss thinned 28.3% to US$35 million versus Q1 fiscal 2024.

Transaction-based revenue rose 44% to US$174.1 million from a year ago. According to Bakshani, the vastly improved results are due to expanded payment adoption and right-sizing of Lightspeed’s cost structure. He said the focus now is to accelerate the growth of the software business for profitable growth.

Revenue outlook

Lightspeed Commerce is confident of achieving total revenue growth of at least 20% in fiscal 2025. The growth will come from subscription revenue (outbound sales, price increases, and software selling). It expects transaction-based revenue to deliver strong growth in Q2 fiscal 2025, as it continues to expand adoption of the company’s payments and capital offerings.

Things are looking up, so profitability could be on the horizon for the $3.4-billion commerce software provider. However, there’s no guarantee that a stock breakout will immediately follow.