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On Thursday, Benchmark analyst Mark Palmer revised the price target for Lightspeed POS (TSX:LSPD) Inc. (NYSE: NYSE:LSPD) stock, reducing it to $16 from the previous $21, while still maintaining a Buy rating on the company. The adjustment in the price target reflects a valuation based on a 2.5 times enterprise value to revenue (EV/revenue) multiple of the firm’s forecasted fiscal year 2026 revenue of $1.229 billion. The stock currently trades near its 52-week low of $9.88, with InvestingPro analysis suggesting the shares are significantly undervalued based on their Fair Value model.
The reassessment comes after Lightspeed’s Capital Markets Day, which initially received a muted response from the market. However, Palmer highlighted that the company’s management has laid out credible plans to drive growth and improve profitability over the next three fiscal years. This strategic direction appears feasible despite Benchmark’s tempered near-term expectations due to current economic headwinds. The company has demonstrated strong revenue growth of 22% in the last twelve months and maintains a healthy financial position with a current ratio of 6.1, indicating robust liquidity.
In the analyst’s view, Lightspeed POS Inc.’s current share price represents a significant discount when compared to its industry peers. Specifically, Lightspeed’s shares are trading at approximately 0.7 times its expected 2026 enterprise value to sales ratio, which is notably lower than the 5.1 times average of its cloud-based point-of-sale (POS) counterparts. InvestingPro data reveals multiple promising indicators, including strong cash position and minimal debt, with a debt-to-equity ratio of just 0.01.
The price target reduction and the maintained Buy rating suggest that Benchmark sees the current market valuation as an opportunity, believing that the company’s stock has the potential to appreciate in value as it executes its growth and profitability strategies.
Investors may find this new target and the maintained Buy rating informative as they consider the potential long-term value of Lightspeed POS Inc. amidst a challenging macroeconomic environment. The company’s efforts to reinvigorate its growth trajectory and enhance profitability over the coming years will be key factors to watch.
In other recent news, Lightspeed Commerce Inc. has adjusted its financial outlook for fiscal year 2025, now anticipating a revenue growth of approximately 18%, down from the previous estimate of 20%. This revision is attributed to macroeconomic challenges, including heightened inflation and decreased consumer confidence, which have impacted transaction-based revenue. Despite these hurdles, Lightspeed remains focused on achieving an adjusted EBITDA of over $53 million for FY25. The company has also announced a significant $430 million share buyback program, reflecting confidence in its strategic plan and financial strength.
Analysts have responded to these developments with adjustments to Lightspeed’s stock price targets. Piper Sandler lowered its price target to $11, maintaining a Neutral rating, while BTIG reduced its target to $14 but kept a Buy rating, expressing cautious optimism about long-term growth. Scotiabank (TSX:BNS) also adjusted its target to $17, citing ongoing macroeconomic challenges. Lightspeed’s Capital Markets Day provided further insights into its growth strategies, including a focus on North American retail and European hospitality markets.
The company aims for a compound annual growth rate of 15-18% in consolidated gross profit by fiscal year 2028, supported by investments in sales, marketing, and product development. Lightspeed’s future growth is expected to be driven by an expansion of direct sales teams and additional product investments, with gross margins anticipated to improve by up to 300 basis points by 2028. The company’s strategic initiatives are designed to accelerate customer location growth and expand subscription average revenue per user, despite the current economic pressures.
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