On Friday, Scotiabank updated its rating for Lightspeed POS Inc. (NYSE:), increasing their price target to $21 from $20 previously while maintaining an Outperform rating for the sector. The revision comes after a positive quarterly report and the issuance of the company's guidance for fiscal year 2025, which exceeded expectations.
The financial institution cites the expected acceleration in software growth in the second half of 2025 and a growing focus on profitability as reasons for its optimism about Lightspeed's prospects. The stock has seen a big rally, closing up 15% today, attributed to strong Q4 performance and encouraging guidance for FY25.
Scotiabank's analysis indicates that Lightspeed POS is currently undervalued compared to its peers, trading at 2.8 times estimated calendar year 2025 gross profit (CY25E GP), while its peers trade at an average of 7.9 times. The company believes that there is great potential to reclassify the value of the stock.
The bank also highlights several factors that could further improve Lightspeed's financial outlook. This includes higher program attach rates, the addition of more high gross transaction volume locations, and improving retail spending trends supported by a recovering macroeconomic environment.
Scotiabank's confidence in Lightspeed POS is reinforced by the company's performance in gross merchandise volume (GMV) monetization. Lightspeed's net attach rate, or Gross Profit/Gross Transaction Volume (GP/GTV), was reported at 0.50%, which is favorable when compared to estimates and also when viewed against industry peers like TOST and SHOP, which have higher rates of ~0.80% and 1.57%, respectively.
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InvestingPro Insights
In light of Scotiabank's optimistic outlook for Lightspeed POS Inc. (NYSE:LSPD), current InvestingPro data provides additional context for investors. The company's market capitalization is approximately $2.32 billion, which reflects its position in the market. Notably, Lightspeed's revenues grew 24.6% over the past 12 months as of Q3 2024, demonstrating healthy expansion of the business. Furthermore, the company's gross profit margin during the same period was 43.15%, indicating a strong ability to retain profits from sales after accounting for cost of goods sold.
InvestingPro's tips highlight that Lightspeed holds more cash than debt, providing financial stability and flexibility. Furthermore, analysts expect the company to turn a profit this year, which represents a significant turnaround given that it was not profitable in the last twelve months. These insights suggest that Lightspeed is on a path toward improving financial health, consistent with Scotiabank's positive assessment.
For investors seeking to dig deeper into Lightspeed's financials and future outlook, InvestingPro offers additional tips about the company. Use coupon code ProNews24 Get an extra 10% off your annual or semi-annual Pro and Pro+ subscription, and discover the full range of insights, including 5 additional InvestingPro tips that can help inform your investment decisions.
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