The recent broad selloff in software and payments stocks has created an “attractive entry point” for Lightspeed POS Inc. , according to BTIG analyst Mark Palmer.
Calling it a “cloud-based POS leader with accelerating fundamentals and upside from payment,” he upgraded the Montreal-based firm to “buy” from a “neutral” recommendation on Tuesday.
“During the early weeks of the COVID-19 pandemic, LSPD management asserted that the crisis would accelerate demand for cloud-based POS solutions by several years as it had exposed the shortcomings of legacy cash registers and on-premise servers,” said Mr. Palmer in a research note. “That prediction began to be borne out during the balance of 2020 as LSPD’s operating performance impressed despite its emphasis on small- and medium-sized businesses, a group hit particularly hard by the crisis, and on the pandemic-impacted hospitality vertical.
“LSPD added to its exposure in the hospitality and restaurant sectors with its acquisitions of ShopKeep and Upserve, and, as such, we believe the deals made the company even more levered to improvement in the macroeconomic environment as vaccines become more widely distributed and the impact of the pandemic abates. We expect LSPD to post top-line growth in the 40-per-cent context during the next couple of years, an estimate that reflects our view it will be a significant beneficiary of consumers’ return to a more normal footing.”
Mr. Palmer called cross-selling of modules “a key driver” of Lightspeed’s organic growth moving forward, seeing “plenty of room for additional penetrations. He also pointed to momentum in its payments offering and upside optionality stemming from the rollout of the Lightspeed Supplier Network for North American retailers.
The analyst set a target of $97 for Lightspeed shares. The average target on the Street is $101.93, according to Refinitiv data.
“Shares of LSPD have declined by almost34 per cent in just over two weeks amidst a broad selloff in the software and payments space, a retreat that we view as an opportunity for investors to buy into an attractive restaurant and retail point-of-sale (POS) leader with accelerating fundamentals at a reasonable valuation,” he said.