CIBC Upgrades Lightspeed to “Outperform” from a “Neutral” Rating

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:

1. 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.
2. 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.
3. Improved Positioning: Lightspeed is perceived to be better positioned to execute its growth and margin expansion strategies in the current year.
4. 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:

1. Growth Initiatives: Lightspeed aims to expand adjusted EBITDA while growing its high-GTV customer base, subscription revenues, payments adoption, and merchant cash advances (MCA).
2. 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.
3. Payments Adoption: Lightspeed plans to increase payments adoption and provide more Merchant Cash Advances, which are expected to contribute to EBITDA margin expansion.
4. 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.
5. 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

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.