Lightspeed Stock Has a Plan, Cash, and Momentum: So, Why the Doubt?

Lightspeed Commerce (TSX:LSPD) earnings are out, with a quarter that should calm investor nerves. Growth improved, management raised its outlook, and the company sounded more focused than it has in years. Yet the market still treated the stock like it had something to prove, with shares dropping by up to 7%. CEO Dax Dasilva didn’t fight that reality. “It’s a show me story,” he told Motley Fool Canada, “and we’re delivering consistently.”

What happened?

Let’s start with what Lightspeed stock does. It sells point-of-sale (POS) software to retailers and restaurants, then earns more when those customers run payments through its platform. Payments can scale quickly with customer activity, while subscription growth reflects how fast the customer base expands and how much it pays for software.

Yet while in the past it took a “land and launch” approach, Dasilva said Lightspeed stock stopped trying to sell every product everywhere. It narrowed the core growth engine to North American retail and European hospitality, where the products fit best and win rates run higher. That focus showed up in customer growth. Lightspeed stock added about 2,600 net new locations in the quarter and ended with around 148,000 customer locations.

“Locations is the key, right? Because once you have a location that also comes with its related payments,” Dasilva said. “And then every new location… is future potential that you can sell modules.”

So, why the drop?

Now to the two pressure points investors should press on: soft software growth and the wider reported loss. On software, Dasilva’s answer is execution. He argued Lightspeed stock has built the outbound sales machine and now has to ramp productivity and attach more software modules over time. “We’ve fully hired our 150 reps for outbound,” he said, and expects training and new product rollouts to lift performance. Investors should watch for improving subscription growth and stronger revenue per location.

The net loss headline also needs context. Dasilva says the larger loss was not a sign that day-to-day operations weakened. Instead, Lightspeed stock accelerated depreciation and amortization on older technology assets from the pandemic acquisition period.

It chose to recognize more of that non-cash expense this fiscal year as newer builds, including artificial intelligence (AI)-driven features, which reduce the value of some legacy software assets. He expects that accelerated charge to show up again next quarter, then largely disappear in the new fiscal year. Next year should show cleaner results without that extra amortization drag.

What investors get today

With volatility in the markets, it’s clear why investors aren’t exactly jumping towards tech stocks like Lightspeed stock. Yet there are opportunities for today’s investor. Lightspeed stock has a $400 million buyback authorization and has executed about $200 million so far. “Subject to market conditions and board approval… we could potentially do more,” Dasilva added.

The risks remain real, including competition, churn, and mix. If rivals pressure pricing or payment economics, margins can stall. If subscription growth stays soft, the market may keep discounting the story. If location growth slows, the “show me” phase lasts longer. Yet with AI accelerating the use of multiple modules by current and future clients, Dasilva argued, giving customers access to their own data will allow them to be more competitive. And those improvements turn into payments, with payments funnelling to Lightspeed stock.

“That’s the kind of AI jet-powered tool that we can build with proprietary data. So, for us, we are excited and leaning in,” Dasilva said. “We’re providing a solution and have the data to actually power those tools.”

Bottom line

For long-term Canadian investors who own the stock, the next few years come down to repeatable execution. That means steady location adds, stable churn, improving cash flow, and accounting noise fading next year. If those pieces land, the story can shift from turnaround to compounding, and Lightspeed stock can reward patient investors handsomely.

The post Lightspeed Stock Has a Plan, Cash, and Momentum: So, Why the Doubt? appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Lightspeed Commerce. The Motley Fool has a disclosure policy.