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On Monday, JPMorgan made a notable adjustment to Lightspeed POS (TSX:LSPD) Inc. (NYSE:LSPD), downgrading the company’s stock rating from Neutral to Underweight and reducing the price target to $9.00 from the previous $10.00. The research firm’s analysts cited a strategic shift in Lightspeed’s business approach, focusing on profitable growth, as a reason for adopting a more cautious stance. The stock, currently trading at $9.11, has shown significant volatility with a 14.3% gain over the past week, though it remains down over 40% year-to-date according to InvestingPro data.
Lightspeed POS Inc., a provider of point-of-sale software, has been recognized for benefiting from two significant trends in the POS industry: the shift towards SaaS-based solutions and software’s increasing role in payments distribution. The company’s growth has been largely driven by its mergers and acquisitions strategy, resulting in impressive revenue growth of 22% over the last twelve months to $1.05 billion. InvestingPro analysis suggests the company is currently undervalued, with additional insights available in the comprehensive Pro Research Report.
Despite the company’s efforts to re-orient its business towards sustainable profitable growth, JPMorgan analysts expressed a preference for companies that show organic growth in niche markets, noting the competitive nature of Lightspeed’s core retail and restaurant verticals. They have chosen to adopt a wait-and-see perspective regarding Lightspeed’s narrowed focus and its combined POS/payments initiative. While currently unprofitable with a -$123.8 million net income, InvestingPro analysts project the company will achieve profitability this fiscal year.
The analysts also pointed out the company’s investments in expanding its presence in the retail sector in North America and the hospitality industry in Europe. However, they expressed caution over potential customer churn in Lightspeed’s backbook, which constitutes 40% of the business, especially given the high decremental margin. The company maintains strong financial health with a current ratio of 6.1 and more cash than debt on its balance sheet, according to InvestingPro data.
In summary, JPMorgan’s downgrade reflects a conservative outlook on Lightspeed POS Inc. as the company transitions its strategy and invests in key growth markets. The new price target represents a decrease from the previous target, aligning with the firm’s underweight rating.
In other recent news, Lightspeed POS Inc. has been the subject of multiple analyst reports following its Capital Markets Day. RBC Capital Markets maintained an Outperform rating with a price target of $15.00, emphasizing Lightspeed’s strategic shift towards growth markets and a more software-centric sales mix. BMO Capital Markets adjusted its price target to $14.00 from $15.00, maintaining an Outperform rating, while acknowledging economic headwinds and expressing confidence in the company’s growth objectives. Benchmark also revised its price target to $16.00 from $21.00, keeping a Buy rating and highlighting Lightspeed’s discounted valuation compared to industry peers. Piper Sandler lowered its price target to $11.00, maintaining a Neutral rating, expressing caution due to recent growth challenges and restructuring initiatives. BTIG reduced its target to $14.00 from $17.00, retaining a Buy rating, and noted the company’s ambitious growth targets for fiscal year 2028, despite macroeconomic challenges. These analyst updates reflect a range of perspectives on Lightspeed’s strategic plans and financial outlook amidst a competitive and challenging economic environment.
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