Recent IPO Lightspeed Corrects Below September 10 High

Cloud-based commerce platform Lightspeed NYSE: LSPD is an exceptional revenue growth leader, showing growth acceleration in the past four quarters.

Even before the broader market pulled back sharply on Monday, the stock had been trading in an erratic fashion, in tandem with the prior week’s market uncertainty. 

Lightspeed specializes in an integrated commerce platform for retailers, restaurants and golf courses. It serves business customers in several international markets.

Lightspeed's point-of-sale systems also integrate with other partner technologies in the areas of taxes, marketing, loyalty programs, customer service, accounting, business analytics, employee scheduling and more.

Shares are up 28% since the Canadian company reported its fiscal first quarter on August 5.

While earnings growth is a key tenet of many investing strategies, and also something institutional investors screen for, Lightspeed is one of those companies that is riding high on revenue growth and future earnings potential.

Lightspeed reported a loss of $0.05 per share on revenue of $115.9 million. That loss was actually good news, as it trounced analyst estimates for a loss of $0.16 per share. It even topped the so-called "whisper number," the unofficial consensus among analysts who follow the company closely. Those analysts had expected a loss of $0.10 per share.

Revenue also significantly topped views. Wall Street expected sales of $93.2 million.

Lightspeed said it expects second-quarter revenue between $120 million and $124 million, and increased its full-year guidance for fiscal 2022. It now sees revenue coming in at a range between $510 million and $530 million. Earlier guidance called for 2022 revenue between $430 million and $450 million.

In the first quarter, recurring subscription revenue was $49.9 million, an increase of 115% Transaction-based revenue was $56.5 million, up 453%

Revenue has grown at double- or triple-digit rates in each of the past eight quarters.

According to data compiled by Marketbeat, analysts' rating on the stock is a "buy," with a price target of $121.93, representing a 1.27% downside.

Since the company's earnings report, eight analysts boosted their price targets on the stock.

One analyst initiated coverage with a rating of "overweight" and one, JP Morgan Chase's Tien-Tsin Huang, downgraded the stock to underweight from neutral. Huang also downgraded Automatic Data Processing NASDAQ: ADP, saying both stocks were trading at high premiums relative to the broader market.

While analyst ratings don't necessarily translate to price gains or losses, in this case, it's worth keeping an eye on Lightspeed, as it may be at or near the "priced to perfection" zone.

Lightspeed rallied to a high of $128.13 on September 10, before pulling back and retracing some of those gains. It's been whipsawed lately, as the broader market has been in retreat. However, its price performance is still outpacing that of the S&P 500 and the mid-cap index, the S&P 400.

Both comparisons are apt, as Lightspeed boasts a market cap of $15.91 billion. That's technically in large-cap territory, although it reached that designation quickly as it rallied so quickly after its September 2020 IPO.

It went public in Canada in 2019.

Lightspeed is up 72.27% year-to-date and 307.46% on a one-year basis. Even as it's been jumping around between gains and losses in recent sessions, the stock has posted a one-week gain of 2.23%.

This stock's strength makes it worth watching, even as the big techs that have led the market in the past year are declining.

Lightspeed is even outperforming industry peers, such as the much bigger and better known Shopify NYSE: SHOP.

So how should you view the stock's current consolidation?

Since pulling back from its September 10 intraday high, the stock has rallied to lower highs and has found support between $117 and $118. If that support holds, it could be a good sign that selling is limited, even if the broader market remains in a correction. With Monday's pullback, Lightspeed sliced through its 10-day moving average. It regained that line Tuesday but was struggling to maintain early-session gains.

At this point, watch for the stock to surpass its September 10 high of $128.13. However, keep in mind: If the stock pulls back further or crafts a specific base pattern, a new buy point could emerge.