Many are saying they’re selling out because apparent slower organic growth. However please remember last quarter’s YOY is super easy due to COVID lock down in the June 30 quarter of 2020. Granted 58% organic growth is not fabulous but not bad either. Lower gross margin is due to LSPD’s business strategy to grow Payments, which is growing in the right direction to 11% this quarter. Slower customer adds is due to lock down in APAC this quarter, which is similar to what happened during COVID so that’s kind of expected. ARPU is apparently moving in the right direction. Overall I believe they had a solid quarter and the thesis is intact. Please correct me if anything wrong. Thanks.
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Whether it is due to COVID or not, it means LSPD is probably a 60% grower in a normal world, not the 90% many expected going into earnings.
When thesis changed based on new evidence, the most important lesson this board has taught me was that you should sell. Immediately. I believe this was also in the Knowledge Base. In this case, many have found their LSPD thesis changed. Because there are other solid targets for their money, they sold out.
If you are investing in LSPD because you are expected a 60% growth, then there is no need to sell. But for many, the opportunity cost is too expensive not to do so.
37 Likes
I have been in and out of LSPD a few times, as I couldn’t quite get excited enough to make it a full position and was out prior to today. I listened to the call this morning and it actually built my confidence in the company, but still there’s a lot of moving pieces that remain in question.
Part of my lack of confidence so far is that as a subscriber to Bert’s service, he’d written a few times about Shift4, which has some overlap with LSPD in that they provide POS and Payment services to Restaurants and Hotels (and sporting venues), and also have been experiencing fast growth. Yet, their stock had been hammered a few times and without a “short report”. Shift4 (FOUR) is down 28% in the last month and I’d waded into this stock recently as a value play, but only slightly. Over the last 2 days, I tried to deep dive into both of these stocks to see what it is that I was missing. Why was LSPD stock holding up better, even with the short report? FOUR issued a business update recently and got pounded despite announcing that October payment volume was up over 80% versus the same period a year ago, and that active merchant counts are up over 25% for the same period. We don’t know what percent their payments volume had grown, so it was hard to take much from that. Yet the stock got pounded once more.
There’s differences that are profound (both fast growers, but certainly differences in rates and market vertical/geographical exposures) but I could not really grasp why FOUR was being pounded while LSPD was holding up post short-report. If anything, FOUR lacks exposure to the international market as of yet, and to a large extent, also to retail channels. And perhaps that is it in a nutshell.
I hold a very small position in Shift4, but still find it strange that it has been so bloodied. It is down 2.5% this morning in sympathy. They announce Nov 10th, and I thought it might be interesting to at least follow as a contrast for those who will hold onto their LSPD shares. I will watch both.
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I have wondered how quickly I should pull the trigger on a stock. I understand that when the thesis changes, you should sell. There’s no point in waiting. But should you try to jump the gun in extended hours? Or does it not matter much? How quick?
I’ve read where Saul says he’ll sell some, then ponder, then sell the rest. That doesn’t sound immediate…but then again, I also recall reading where Saul said he sold half of a position after hours and then the rest the next morning, so that matches the narrative of selling half, waiting, then selling the rest and it matches the narrative of selling immediately (all of the position was sold before the market opened the next day).
I guess it just comes down to how quickly you decide whether your thesis is in tact? Is that right?
I sold LSPD pre-market, and that currently looks like a good move (it was down 20% when I sold, now it’s down 28%). But I did something similar with SHOP, and I wound up selling when it was down 7-8% pre-market, and the stock wound up being up 7-8% for the day. Sort of a mistake (though I still maintain that the earnings announcement was mediocre at best, so maybe not a mistake – I’m still not certain whether I want to be in SHOP.)
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Quick glance at FOUR shows why it isn’t loved (or at least hasn’t earned love yet) in my opinion:
(I’m not checking this real close. Hopefully it copy and pasted accurately…)
Jun-21 Mar-21 Dec-20 Sep-20 Jun-20 Mar-20 Dec-19 Sep-19
10-Q 10-Q 10-K 10-Q 10-Q 10-Q 10-K 10-Q
Revenue 351.0 239.3 210.9 214.8 141.8 199.4 202.1 193.8
Growth 147.5% 20.0% 4.4% 10.8% -21.4% ? 33.6% 30.2%
GM 22.3% 21.6% 23.5% 24.0% 22.3% 21.8% 22.1% 24.0%
- Interesting spike in growth but it is all over the place historically. It does appear the spike let them break even for the first time in awhile (roughly -$51M last Q to $4.5M), but we don’t know if it is sustainable without learning more.
- GM is terrible (or at least compared to other holdings I have. I didn’t dive in at all but I don’t need to know the details really). They simply don’t get to play with much of their revenue spike.
All very much at a glance.
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Certainly true on the “all over the place” comments, but remember, it’s hotels and restaurants (mainly) driving the business during open/close/open/close times. The last quarter was definitely a step-jump up but their release of October numbers indicate that the current quarter is still growing strong and we’ll see about Q3 soon enough.
Secondly, your numbers are using Gross Revenue, rather than Net Revenue (i.e. net revenues that the company reports. gross revenues-much of those revenues are pass-through network fees which do not create profits or free cash flow). Analysts are using Net Revenue and in that case, gross margins were about 58% and growing.
Note that this is not Enterprise SaaS, and Payments Processors do not attain that level of Gross Margins as has been noted with LSPD. Gross margins have been growing.
Lastly, I’ve not proposed FOUR as a Saul Stock as I think it’s yet to be clear what that growth rate will be when things settle out, so much as to point out some things about FOUR that may be applicable to those who choose to hold onto LSPD. FOUR is probably a 30-40% grower with extremely low (single digit) EV/S ratio - but not currently a Hypergrowth stock. And I’m not sure that LSPD (Organically) currently is either. The market appears very large for such end-to-end products and I plan to watch both of these companies in concert to see how they progress a few quarters out.
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I always found it odd that, when I texted back and forth with Lightspeed support and asked what differentiated them from Square, their only response was “our customer service.” That didn’t seem like a real good answer. I’m out, too, and licking my wounds. I guess I’ll take what’s left of that investment and just keep gobbling up UPST while it’s still down. As far as I can tell, it remains wounded by the two downgrades based on valuation. I have not read one piece of negative news nor seen one negative development.
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“our numbers are using Gross Revenue, rather than Net Revenue”
Yeah, FOUR is one of those companies where net revenue is more meaningful. Same with Square.
On FOUR, i once calculated net revenue as about 38% of gross, and it does raise margins. Margins for FOUR should continue to rise if they are converting their starter gateway accounts to full service as quickly as they say, which would drive up margin.
Hey, i can never find discussion board.
Is there one for each of the Soul stocks?
See you tomorrow.