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On Thursday, RBC Capital Markets maintained its optimistic stance on Lightspeed POS (TSX:LSPD) Inc. (NYSE:LSPD), with a reiterated Outperform rating and a steady price target of $15.00. The firm’s analysis centered on Lightspeed’s strategic shift towards growth markets, with an aim to enhance profitable growth. According to InvestingPro data, the company has demonstrated strong revenue growth of 22% over the last twelve months, despite current profitability challenges. InvestingPro analysis suggests the stock is currently undervalued, with 10+ additional real-time insights available to subscribers. The company’s plan includes expanding its locations in these markets, increasing gross profit through a stronger focus on software sales, and improving adjusted EBITDA and free cash flow (FCF) margins.
Despite a year-to-date decline of approximately 33% in its stock value, Lightspeed is trading at nearly 13 times its calendar year 2025 enterprise value to EBITDA (EV/EBITDA) ratio. The company maintains strong financial health with a current ratio of 6.1 and more cash than debt on its balance sheet. While RBC Capital suggests a neutral valuation, InvestingPro’s comprehensive Fair Value analysis and advanced metrics provide deeper insights into the company’s true value potential. Notably, Lightspeed’s shares are still priced at a premium compared to its peers, such as Corpay, Global Payments (NYSE:GPN), Shift4, and Block.
The firm’s analysts pointed out that while Lightspeed’s new growth strategy is clear and focused, the stock is likely to remain within a certain trading range. This prediction is based on the expectation that investors will look for multiple indications confirming the effectiveness of the company’s strategic redirection before any significant movement in share price occurs. The stock’s recent volatility and proximity to its 52-week low of $9.88 reflect this market sentiment, though analysts project profitability improvements in the coming year.
RBC Capital’s commentary underscores the importance of Lightspeed’s shift towards a more software-centric sales mix, which is anticipated to drive higher gross profits. The company’s focus on growing its footprint in markets with potential for growth is also emphasized as a critical part of its strategy to achieve enhanced profitability.
The financial institution’s maintained price target and rating reflect a steady confidence in Lightspeed’s ability to execute its new strategy. However, the indication is that tangible results will be necessary to catalyze a re-rating of the stock amidst a competitive payments landscape.
In other recent news, Lightspeed Commerce Inc. has announced its three-year financial outlook, projecting a compound annual growth rate (CAGR) of approximately 20-25% for gross profit in its key markets. The company also expects a consolidated gross profit CAGR of around 15-18% and adjusted EBITDA growth to about 20% of gross profit by Fiscal 2028. Additionally, Lightspeed has completed share repurchases totaling over $130 million and has authorized an additional buyback of up to $300 million, reflecting confidence in its strategic plan. Analyst firms have adjusted their price targets for Lightspeed, with BMO Capital Markets lowering it to $14 while maintaining an Outperform rating, and Benchmark reducing it to $16 but maintaining a Buy rating. Piper Sandler also revised its price target to $11, retaining a Neutral rating, citing recent strategic changes and economic headwinds. BTIG lowered its target to $14, maintaining a Buy rating, and noted the company’s potential for accelerated growth in fiscal years 2027 and 2028. These developments come amid Lightspeed’s strategic focus on North American retail and European hospitality to drive growth. The company’s efforts include targeted investments in sales, marketing, and product development to expand customer locations and subscription revenue.
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