Is it too late to sell Lightspeed shares as stock plunges 28% after earnings?

By:
on Nov 4, 2021
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  • Lightspeed shares on Thursday nosedived more than 28% after reporting its FQ2 results.
  • The company announced its most recent quarterly results before markets opened, beating estimates.
  • The quarterly loss grew significantly from last year despite posting a 192.9% revenue growth.

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On Thursday, Lightspeed POS Inc. (NYSE:LSPD) shares declined by more than 28% after announcing its most recent quarterly results. The company reported its fiscal second-quarter revenue and earnings before markets opened, beating the consensus for analyst expectations. However, LSPD revealed that FQ2 2022 loss more than doubled despite significant growth in the top line.

The company posted FQ2 non-GAAP earnings per share of -$0.08, beating the consensus for analyst expectations of -$0.10. On the other hand, its GAAP EPS of -$0.43 missed the average analyst estimate of -$0.34, while revenue for the quarter increased by 192.9% from the same quarter last year to $133.22 million, surpassing Street expectations by $9.05 million.

Nonetheless, Lightspeed said loss for the quarter grew from $4.6 million in FQ2 2021 to $11.1 million.

Lightspeed looks overvalued

From an investment perspective, Lightspeed shares trade at a steep price-sales ratio of 48.76 and a P/B ratio of 5.04. Therefore, value investors could opt for alternatives in the market.

In addition, analysts expect its earnings per share to decline by 89.50, thus making the stock less compelling to growth investors.

Therefore, given the company’s expensive valuation and underwhelming growth prospects, it may not be too late to open a short position.

Source – TradingView

Technically, Lightspeed shares seem to have recently plummeted to complete a downward breakout from an ascending channel formation. As a result, the stock has fallen closer to the oversold conditions, thus creating an opportunity for a rebound. 

However, with shares far from retesting this year’s lows, there could be more shorting opportunities before a rebound occurs.

Therefore, investors could target extended declines at about $64.84, or lower at $54.82, while $79.52, or higher at $89.13.

It may not be too late to sell

In summary, although Lightspeed shares seem to have plummeted closer to oversold conditions, thus creating an opportunity for a rebound, the stock still trades under significant bearish pressure amid its steep valuation.

Therefore, with shares yet to retest this year’s lows, it may not be too late to open a short position.

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