Lightspeed Analyst Coverage
CIBC’s upgrade on Lightspeed to an “Outperformer” from “Neutral” is based on their assessment of the company’s strategic pivot towards growth and profitability. Here’s a breakdown of their analysis:
Reasons for the Upgrade:
- Presentation Insights: The upgrade was influenced by Lightspeed’s CFO, Asha Bakshani’s presentation at CIBC’s (Analyst Rank #12) Technology & Innovation conference, which provided detailed insights into the sources of growth and EBITDA expansion supporting the company’s strategic pivot.
- Growth and Margin Expansion: CIBC has confidence in Lightspeed’s ability to execute on its growth and margin expansion priorities, citing credible sources of growth and EBITDA expansion.
- Improved Positioning: Lightspeed is perceived to be better positioned to execute its growth and margin expansion strategies in the current year.
- Valuation Multiple Increase: The factors supporting Lightspeed’s growth and margin expansion priorities have led to an increase in CIBC’s valuation multiple and price target.
Key Points from Lightspeed’s Strategy:
- Growth Initiatives: Lightspeed aims to expand adjusted EBITDA while growing its high-GTV customer base, subscription revenues, payments adoption, and merchant cash advances (MCA).
- Revenue Growth: The company expects software revenue growth to increase, driven by selective price increases and the redeployment of its salesforce to focus on new customer additions.
- Payments Adoption: Lightspeed plans to increase payments adoption and provide more Merchant Cash Advances, which are expected to contribute to EBITDA margin expansion.
- Target Customer Profile: The company is focused on SMBs with high gross transaction values (GTV) in retail and hospitality, aiming to attract higher-value customers.
- Advantages of Lightspeed’s Platform: The platform is deemed suitable for larger merchants with complex needs, particularly in cloud POS and integrated payments.
Financial Projections and Price Target:
- CIBC’s price target for Lightspeed is increased to C$33 (from C$26) based on a valuation multiple of 3x their F2025E sales forecast.
- This valuation is justified by Lightspeed’s growth prospects, strategic initiatives, and comparative valuation metrics against peers and industry indexes.
Upside and Downside Scenarios:
- CIBC provides potential upside and downside scenarios based on different sales and valuation assumptions, with price targets ranging from C$13 to C$49.
Overall, CIBC’s upgrade on Lightspeed reflects their confidence in the company’s ability to execute its growth and margin expansion strategies, leading to improved positioning and increased valuation targets.
STA Research (StockTargetAdvisor.com) is a independent Investment Research company that specializes in stock forecasting and analysis with integrated AI, based on our platform stocktargetadvisor.com, EST 2007.
