Price Target Raise to $50 EQUITY RESEARCH
August 6, 2020 Earnings Update
LIGHTSPEED POS, INC.
Q1 Was A Good Quarter, Raising Price Target
Our Conclusion
Lightspeed reported a strong fiscal first quarter that was buoyed by growth in
cloud adoption and new modules as the pandemic hastened retailers and
restaurants to accelerate their digital plans. Our view is Lightspeed’s shares
are attractive and should be purchased.
We reiterate our Outperformer rating and raise our price target to C$50 (prior
C$47). The target is 15x our F2022E base case revenue forecast. Our mid
scenario, that assumes Payments adoption of 25%, yields a value of C$65.
Key Points
First quarter revenue was ~US$36MM and above our forecast of ~US$33M
(FactSet at ~US$31MM). The EPS loss was US$0.22 compared to our
forecast of -US$0.09 (FactSet at -US$0.12).
Lightspeed’s omni-channel solutions and modules (e.g., Payments, Loyalty,
Analytics) drew businesses who are mitigating the risks of a possible second
virus wave and strict social distancing measures. Impressively, customer
locations grew sequentially and helped drive the Y/Y growth in gross
transaction volume (GTV) to $5.4B from $4.6B in FQ1/20. Last quarter,
Payments adoption was over 50% among new U.S. retail and hospitality
locations and Canadian retail. This is well above our conservative plans for
an average of 5.6% and 13.3% of customer locations in F2021 and F2022,
respectively. A new Capital service was introduced that is an offering in
partnership with Stripe for U.S. customers on Payments. Over time, it could
be adopted by 25% of U.S. customers and materially positive to margins. It is
available now and should scale over time.
Our F2021 forecast assumes lower revenue to reflect the impact of COVID19. Positive offsets should continue to include strong module uptake. We
also reiterate that investors can give our mid and upside scenarios, which
assume greater Payments adoption, a higher probability of being achieved.
Our positive Lightspeed investment thesis is based on three points:
1. The SMB market for POS innovation is large with a low cloud
adoption rate. The total available market for Lightspeed's cloud-based POS
system is 47MM SMBs and 15MM restaurants. Lightspeed had 77,000
customer locations compared to 76,500 in Q4 F2020. In FQ1/21, Lightspeed
experienced higher churn and the anticipation is for this to continue rising
over the next few quarters.
2. Lightspeed's platform has advantages for complex SMB needs. It is a
top choice for cloud POS, e-commerce, Payments and Loyalty capabilities.
3. Revenue growth to return post COVID-19 pandemic. Lightspeed's
strong cloud offering and leading SaaS metrics support the achievement of
our forecast, and a valuation of 15x forward base case revenue.