Lightspeed Stock

Lightspeed Commerce Inc. (NYSE: LSPD) might seem like a bold name for a point-of-sale software firm, but this Canadian company wants to help small businesses speed up their payment processing by offering an array of innovative solutions. Recently, the company has expanded its scope to include business analytics software, an office management suite and customer engagement tools. And despite being headquartered in Montreal, Lightspeed Commerce trades on both the Toronto and New York Stock Exchanges.

How to Buy Lightspeed (LSPD) Stock

Lightspeed Commerce has shares trading in multiple markets, so be sure you’re getting the right stock. If you’re trading in the United States, you’ll want the share class that trades on the New York Stock Exchange (LSPD) and not the one trading on the Toronto Stock Exchange (LSPD.TO). Note that these shares aren’t always trading at exactly the same price, but both represent equity in the same company.

Step 1: Pick a brokerage.

To buy shares, you’ll need an account at a brokerage. Retail investors have never had a wider selection of online brokerage choices and commissions are zero at most places. Choose a broker that has LSPD shares, of course, but also make your selection based on comfortability with the platform, access to customer service and research materials and lack of fees. Commissions on stock trades might be extinct, but hidden fees are not.

Step 2: Decide how many shares you want.

To determine how many shares to buy, you’ll need to consider your overall available capital and how much of it to devote to a company like Lightspeed Commerce. Are sales increasing? Have executives raised or tempered guidance? You’ll need to research the company’s future outlook in order to decide how heavy (or light) to go. A good rule of thumb is to never devote more than 2% to 3% of your capital to a single stock, but your personal risk tolerance might be higher than the average investors. Just remember that individual stocks get cut in half frequently.

Step 3: Choose your order type.

Not only must you decide how many shares to buy, but you’ll need to pick an order type as well. If you’re placing a large volume trade, getting the best possible price is crucial to maximizing profits. A limit order allows you to set parameters on when your purchase will be executed, while a market order just buys shares at the best available price on the exchange. A limit order won’t be activated until your predetermined limit price is reached.

Step 4: Execute your trade. 

How do you find an ideal price to set for your limit? Technical analysis often reveals good entry points based on concepts like support and resistance. A support level is a price where a falling stock finds buyers, while a resistance level is where a rising stock finds sellers. Buying at support and selling at resistance is a popular trading technique that fuels a number of strategies. If you think you’ve identified a support level in the LSPD price, execute your trade at this point.

Lightspeed (LSPD) Stock History

Lightspeed Commerce was founded in 2005 by current CEO Dax DeSilva. The company found a niche helping small and mid-size businesses upgrade their e-commerce platforms and payment processing solutions. With memories of the dot com bubble beginning to fade, many smaller firms wanted to reestablish their online footprint but couldn’t find software designed to operate at their scale. Through Lightspeed, these firms now have access to a complete range of e-commerce features that enable faster payments and increased customer engagement.

Lightspeed Commerce went public on the Toronto Stock Exchange (TSX) in March 2019, but shares didn’t appear on the NYSE until the end of summer in 2020. Since debuting in U.S. markets, LSPD has been a winner for shareholders. After trading as low as $28 in the fall of 2020, the stock hit the $70 mark as the calendar flipped to 2021. Some range-bound trading ensued until May, but another bull run quickly followed and the stock hit an all-time high of $120.68 in early September. In the last 12 months, the stock has gone up a blistering 300%.

Lightspeed (LSPD) Restrictions for Retail Investors

Retail investors should have no trouble locating and purchasing LSPD shares. The stock is available on most major online brokers, including apps like Robinhood and Webull. Additionally, there are over 140 million outstanding shares in the float and the stock trades on the NYSE. You’ll find ample liquidity regardless of how much you want to purchase.

Pros and Cons of Lightspeed (LSPD)

Pro: Increasing revenue

Lightspeed has been growing revenue at an excellent clip. The company’s annual revenue nearly doubled from $120 million in 2019 to $220 million in 2020. And this year has been more of the same with the firm reported over $115 million in revenue from Q1 in 2021 alone. Technology companies tend to be popular among the stock markets because they can easily produce revenue.

Con: Has easy money been made?

Revenue growth has been accelerating, but so has the company’s valuation. After a 300% advance in the stock price, has the growth of the firm already been priced in? Investors will have to consider the premium they want to put on a company that’s already exceeded expectations. However, capital formation can change over time as the market shifts. With the crypto industry suffering and certain sectors of the economy slipping, some investors might feel that the easy money will not be around forever.

Pro: More market to grab

Efficient point-of-sale software will become increasingly more important to small businesses as more and more commerce moves online. According to Statista, e-commerce only represents 18% of global retail sales. The pandemic has accelerated the trend from brick-and-mortar to e-commerce, and Lightspeed will still have lots of potential customers to help with that transition.

Con: Declining gross margins

Gross margin refers to the percentage of each dollar in a revenue a company retains after accounting for costs. Obviously, the more money a company retains in profit, the better it performs. LSPD margins have been heading in the wrong direction though. In March 2020, the company reported gross margins of 91%. However, by June 2021, that number had dropped to 72%.

Lightspeed Commerce is a Promising Company, but How Much Room is Left to Run?

E-commerce is the next wave for small businesses, and there will be plenty of markets for software that enables a seamless transition. Lightspeed Commerce has already shown that to be true with its outstanding revenue growth, but the company still isn’t turning a profit and now boasts a hefty valuation. 

Before buying shares of LSPD, you’ll need to ask yourself if the expected future growth of the firm is already priced in. Plus, there are competitors like Square and Shopify with deeper pockets who will be looking to squash smaller firms. The market will be huge, but competition is fierce. Consider your options carefully before investing in Lightspeed Commerce shares.

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