On Friday, Scotiabank updated its assessment of Lightspeed POS Inc. (NYSE:LSPD), increasing the price target to $21 from the previous $20 while maintaining a Sector Outperform rating. The adjustment follows a positive quarterly report and the release of the company's fiscal year 2025 guidance, which surpassed expectations.
The financial institution cites an anticipated acceleration in software growth in the second half of 2025 and a heightened emphasis on profitability as reasons for their optimism about Lightspeed's prospects. The stock experienced a significant rise, closing up 15% today, attributed to the robust fourth-quarter performance and the encouraging guidance for FY25.
Scotiabank's analysis suggests that Lightspeed POS is currently undervalued compared to its peers, trading at 2.8 times its calendar year 2025 estimated Gross Profit (CY25E GP), while its counterparts are trading at an average of 7.9 times. The firm believes that there is considerable potential for a re-rating of the stock's value.
The bank also highlights several factors that could further improve Lightspeed's financial forecast. These include a higher software attachment rate, the addition of more high-gross transaction volume locations, and improved retail spending trends supported by a recovering macroeconomic environment.
Scotiabank's confidence in Lightspeed POS is bolstered 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 the estimates and also when viewed against industry peers such as TOST and SHOP, which have higher rates of ~0.80% and 1.57% respectively.
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 stands at approximately $2.32 billion, reflecting its position in the market. Notably, Lightspeed's revenue has grown by 24.6% over the last twelve months as of Q3 2024, signifying healthy business expansion. Moreover, the company's gross profit margin during the same period was a solid 43.15%, indicating a strong ability to retain earnings from sales after accounting for the cost of goods sold.
InvestingPro Tips highlight that Lightspeed holds more cash than debt, providing financial stability and flexibility. Moreover, analysts predict the company will be profitable this year, which is a significant turnaround given that it was not profitable over the last twelve months. These insights suggest that Lightspeed is on a trajectory towards improved financial health, aligning with Scotiabank's positive assessment.
For investors seeking a deeper dive into Lightspeed's financials and future outlook, InvestingPro offers additional tips on the company. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and uncover the full range of insights, including 5 more InvestingPro Tips that could help inform your investment decisions.
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