All the technologies have been pranced on the stock market for a year. All? No. Because while its rivals, including Ottawa’s Shopify, have set out to conquer new stock market heights, Montreal’s Lightspeed is struggling to convince its toughest critics. However, there is no shortage of good news…
Lightspeed revealed results that exceeded expectations at the end of last week. Its turnover for the months of October to December jumped 27%, to $240 million. This allowed it to generate earnings before interest, taxes, depreciation and amortization (EBITDA) of $3.6 million. Not only is this a second quarter in a row in the green for the occupant of the very elegant Viger station in Montreal, it is also almost double what analysts were hoping for.
Over three months, Lightspeed’s merchant payment solutions also received a transaction volume of $100 million for the first time. It is symbolic, but it is an indicator of an upward trend which should continue into 2024, believes the company’s management.
It will not make official projections before the publication of its annual report next April, but it notes that its sector of activity is benefiting from a favorable situation. She also recalls, more generally, that the same analysts who say they are disappointed with its performance predict a drop in interest rates before the end of the year, which would very likely work in its favor.
Because while Lightspeed’s activities seem to be going smoothly, on the Toronto Stock Exchange, its shares have deflated significantly. A 27% drop in one session brought its valuation below $3 billion, close to its historic low, and erased the gains made in the last three months.
This is a completely opposite path to that taken by all technology stocks. Over the same period, the Nasdaq – the North American benchmark index in the sector – grew by 26%. The company Shopify, the other Canadian heavyweight in e-commerce, has almost doubled in value since the fall.
Horizon 2025
So what’s going on? “ [Notre situation] is probably something that investors liked less over the last year or two,” admits to Duty Lightspeed President and CEO Jean Paul Chauvet. “They were looking for profitable companies”, profitability. This is so new for Lightspeed that it is not yet seen as a habit by specialists, if we rely on their comments.
“Management has mentioned new and, in our view, unexpected investments in sales and marketing to accelerate the addition of new merchant customers,” Richard Tse, an analyst at National Bank, wrote in a note to investors. According to him, this weakens Lightspeed’s financial health in the longer term. He predicts a tightening of its profit margin somewhere around 2025. “Their increasingly likely intention to want to make new acquisitions adds to the risk,” he adds.
Unsurprisingly, the big boss of Lightspeed sees things differently. “Projectionally, we want to remain profitable, with positive EBITDA, and we intend to continue our growth,” says Jean Paul Chauvet. “There is a demand, so our goal is to use our products to have a greater cash flow. »
“We can gain a larger share of the market in a profitable way,” assures the Montreal manager. We will see growth in terms of the number of customers and the volume of transactions. So our stock should go up. »
Opportunities to seize
Very smart is anyone who can predict what will happen in the next year, even more so in 2025. The global economy in a post-pandemic context is very different from that of the last decade.
The digital shift, undertaken when physical distancing forced merchants to lock down their businesses, is not disappearing now that customers are back in person. “This is a huge opportunity for us,” says the CEO of Lightspeed. The majority of merchants operate on old platforms, which creates openings. »
As a bonus, if central banks around the world decided to lower their interest rates, this could stimulate investment by companies wishing to modernize their payment systems, we add at Lightspeed.
A rate cut in the United States, which is increasingly being considered, would be particularly beneficial given Lightspeed’s advantageous position in this market, where its cloud payment solution is a benchmark for mid- to large-sized retailers. . Lightspeed also has a presence in the global foodservice market, where much of its growth is occurring outside of North America.
“We are betting that rates will fall in the coming months, and for us, it will only be positive,” assures Jean Paul Chauvet.