Lightspeed POS Inc

Lightspeed Unveils New eCommerce Features: Lightspeed POS Inc. (TSX: LSPD) provides omni-channel commerce-enabling SaaS platform. As on 21 July 2020, the market capitalization of the company stood at ~CAD 2.78 billion. The company has announced the upcoming release of new Lightspeed e-Commerce features that will strengthen its omnichannel experience. The company saw an increase of 400% in eCommerce volumes processed by its retailers in April 2020, illustrating that merchants who adopted Lightspeed eCommerce to power their online business were able to adapt quickly to changing consumer behavior.

Quarterly Performance (For the Year Ended 31 March 2020): During the year ended 31 March 2020, LSPD saw record uptake of its eCommerce, Delivery and Payments platforms as businesses worldwide adopted new sales channels to continue reaching customers amidst the outbreak of COVID-19. During the year, revenue of the company went up by 56% to USD 120.6 million and gross margin was 64% with gross profit up by 44% on the prior year.

Outlook: Heightened uncertainty in the global economy is having an acute impact on LSPD business. The urgent need of shift in small and medium-sized retail and hospitality businesses has posed immense opportunities for the company.

Key Risks: The effects of the COVID-19 pandemic and related government shutdowns are impacting retailers and restaurants globally. The company anticipates that customers' GTV and the demand for services will be impacted and business failures in its customer base will increase.

Stock Recommendation: The company retains healthy fundamentals, including broad omni-channel cloud solution set, geographically-diverse customer base balanced between retail and hospitality, subscription-based software business model, compelling payments offering, and strong balance sheet. This positions the company well to capitalize on the shift. As per TSX, the stock of LSPD is trading slightly above the average of its 52-week trading range but retains the potential for further growth. The stock of LSPD gave a return of 65.72% in the past three months and a return of 4.27% in the last one month. Considering the decent returns in the past three months, new eCommerce features, decent financial performance and positive long-term outlook, we recommend a ‘Hold’ rating on the stock at the closing market price of CAD 35.61, up by 2.0344% on 21 July 2020.

LSPD Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

BlackBerry Limited

Upwad Stock Price Trend for BB: BlackBerry Limited (TSX: BB) is a software provider with a stated goal of end-to-end secure communication for enterprises. As on 21 July 2020, the market capitalization of the company stood at ~CAD 3.64 billion.

Quarterly Performance (For the Period Ended 31 May 2020): During the three months ended 31 May 2020, total company revenue stood at USD 214 million versus USD 267 million last year and recurring non-GAAP software product revenue was over 90%. In the same time span, non-GAAP gross margin was 71% versus 75% last year and non-GAAP operating earnings were USD 3 million versus non-GAAP operating earnings of USD 5 million last year. As on 31 May 2020, the company retained total cash and long-term investments of USD 955 million and net cash used by operating activities stood at USD 31 million. In the same time span, the company incurred capital expenditures of USD 1 million.

Quarterly Performance (Source: Company Reports)

BlackBerry Solutions Address 96% of the Enterprise Threat Landscape: The company has recently announced that an independent Frost & Sullivan report concludes that BlackBerry can secure all IoT endpoints, and upwards of 96% of all cyberthreats. The report reviews the cyberthreat landscape and the proportion of risks against which BlackBerry's suite of solutions protect enterprises.

Key Risks: The investment in the company is subject to various risks including difficulties in forecasting BlackBerry's financial results and performance for future periods, particularly over longer periods, given changes in technology and BlackBerry's business strategy, evolving industry standards, intense competition and short product life cycles that characterize the industries in which BlackBerry operates.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company has partnered with Bell and is offering its enterprise customers access to BlackBerry Protect, the MTD solution that uses the power of artificial intelligence to block malware infections, prevent URL phishing attacks and provide application integrity checking. As per TSX, the stock of BB is currently trading below the average of its 52-week trading range. The stock of BB gave a return of 16.55% in the past three months. We have valued the stock using the EV/Sales multiple based illustrative relative valuation method and have arrived at a target price offering an upside of lower double-digit (in percentage terms). For the said purposes, we have considered Sharp Corp, Commvault Systems Inc and Cyberark Software Ltd as peers. Considering the current trading levels, decent returns in the past three months, its partnership with Bell and long-term positive outlook, we recommend a ‘Hold’ rating on the stock at the closing market price of CAD 6.55. down by 3.1065% on 21 July 2020.

BB Daily Technical Price Chart (Source: Refinitiv, Thomson Reuters)

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