Toast's Resilient Growth Amid Industry Challenges
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 5 days ago
0mins
Should l Buy TOST?
Source: Fool
- Significant Revenue Growth: Toast achieved $1.6 billion in revenue for Q3, marking a 25% increase, while diluted earnings per share (EPS) surged 128% to $0.16, demonstrating the company's robust performance amid industry challenges.
- Recurring Revenue Increase: The annualized recurring revenue (ARR) run rate rose 30% to $2 billion, indicating the sustainability of its business model and increasing customer retention.
- Customer Base Expansion: The total number of locations increased by 23% to 156,000, with large operators like TGI Fridays joining, further solidifying Toast's market position.
- Strategic Partnerships: Toast established multi-year strategic partnerships with Uber and Instacart, expanding its market influence and business scope, and despite the overall challenges in the restaurant industry, Toast's outlook remains optimistic.
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Analyst Views on TOST
Wall Street analysts forecast TOST stock price to rise
21 Analyst Rating
13 Buy
8 Hold
0 Sell
Moderate Buy
Current: 26.140
Low
36.00
Averages
47.00
High
60.00
Current: 26.140
Low
36.00
Averages
47.00
High
60.00
About TOST
Toast, Inc. is a cloud-based, all-in-one digital technology platform purpose-built for the entire restaurant community. It provides a platform of software-as-a-service (SaaS) products and financial technology solutions, including integrated payment processing, restaurant-grade hardware, and a broad ecosystem of third-party partners. It serves as the restaurant operating system, connecting front of house and back of house operations across service models including dine-in, takeout, delivery, catering, and retail. Its products include point-of-sale (POS) & restaurant operations, marketing, online ordering & delivery, team management, vendor management, retail, and financial technology solutions. Its in-store POS and restaurant operations offerings are built to help reduce time to take an order, optimize operations, and handle payments. Its marketing products provide integrated solutions to deliver targeted email and SMS campaigns, build loyalty programs, offer gift cards, and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Analysis of TOST Options Contracts and Investment Opportunities
- Put Option Appeal: The current bid for the $22.00 put option is 54 cents, and if an investor sells-to-open this contract, they commit to buying shares at $22.00, effectively lowering their cost basis to $21.46, which represents a 22% discount from the current price of $28.16, making it an attractive option for potential investors.
- Yield Potential Analysis: Should the put option expire worthless, the premium would yield a 2.45% return on cash commitment, or an annualized yield of 9.85%, referred to as YieldBoost, indicating the strategy's potential profitability in the current market environment.
- Call Option Returns: The $32.00 call option has a current bid of $1.09, and if an investor buys shares at $28.16 and sells this call, they could achieve a total return of 17.51% if the stock is called away at expiration, highlighting the attractiveness of this strategy.
- Risk Assessment: Current data suggests a 79% chance that the $22.00 put option will expire worthless, while the $32.00 call option has a 59% chance of doing the same, indicating that investors should monitor these probabilities for informed decision-making.
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- Earnings Beat: Despite the revenue drop, Coinbase's adjusted earnings per share were 66 cents, surpassing the Street consensus estimate of 64 cents, demonstrating the company's strong performance in cost management and operational efficiency.
- Stock Price Surge: Coinbase shares jumped 13% to $159.44 on Friday, reflecting investor confidence in the company's profitability, even though overall revenue fell short of expectations.
- Market Environment Impact: The broader U.S. stock market declined, with the Dow Jones falling around 0.2% on Friday, indicating macroeconomic pressures on tech stocks that may affect Coinbase's future market performance.
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- Significant Stock Decline: Pinterest shares plummeted 19.5% to $14.95 in pre-market trading, a drastic move that may raise concerns about the company's future performance and influence investor decisions.
- Mixed Market Sentiment: U.S. stock futures showed mixed results, with Dow futures down about 0.2%, reflecting cautious market sentiment potentially linked to Pinterest's earnings report, further exacerbating investor unease.
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- Earnings Growth Outlook: Arista Networks (ANET) reported strong demand for ethernet switches and routers in its quarterly results, now projecting a 25% revenue growth for the year, up from a previous target of 20%, highlighting the company's pivotal role in AI infrastructure spending.
- Stock Performance Excellence: Since May 2022, ANET's stock has outperformed the S&P 500 by 362%, reflecting strong market confidence in its growth potential, with CEO Ullal emphasizing the company's central role in mission-critical network transactions.
- Surge in Deferred Revenue: The company reported deferred revenue of $5.37 billion, indicating a growing backlog, and investors will closely monitor the conversion of multistage projects to ensure cash flow supports higher innovation spending.
- Positive Market Reaction: In pre-market trading, ANET's stock surged over 10%, demonstrating a positive market response to its robust performance and growth outlook, further solidifying its leadership position in the AI networking sector.
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- Earnings Beat: The company posted adjusted earnings of $2.38 per share for the first quarter, surpassing the $2.20 estimate, reflecting improved cost control and operational efficiency, which is likely to attract more investor interest.
- Stock Surge: Following the earnings report, Applied Materials shares jumped 11.9% to $367.50 in pre-market trading, indicating a positive market sentiment towards the company's growth prospects, potentially boosting investor confidence further.
- Positive Q2 Guidance: The company issued second-quarter guidance above market expectations, demonstrating management's confidence in future performance, which is expected to drive more capital inflows and enhance its competitive position in the industry.
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Toast Shares Decline Over 26% Year-to-Date Amid Mixed Q4 Results
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- Market Reaction: Toast's stock closed at $26.14, giving it a market value of $13.5 billion, with shares down over 26% year-to-date, likely heading for its worst annual loss since going public in 2021, reflecting investor concerns about the company's valuation.
- Investment Strategy: The company is heavily investing in new verticals, products, and AI, with plans to achieve adjusted EBITDA of $775 million to $795 million by 2026, demonstrating confidence in future growth prospects.
- User Sentiment Shift: Retail sentiment on Stocktwits shifted from 'bullish' to 'extremely bullish', although some users questioned the company's financial reporting, highlighting a divide in market perceptions regarding Toast's future performance.
See More
Analysis of TOST Options Contracts and Investment Opportunities
- Put Option Appeal: The current bid for the $22.00 put option is 54 cents, and if an investor sells-to-open this contract, they commit to buying shares at $22.00, effectively lowering their cost basis to $21.46, which represents a 22% discount from the current price of $28.16, making it an attractive option for potential investors.
- Yield Potential Analysis: Should the put option expire worthless, the premium would yield a 2.45% return on cash commitment, or an annualized yield of 9.85%, referred to as YieldBoost, indicating the strategy's potential profitability in the current market environment.
- Call Option Returns: The $32.00 call option has a current bid of $1.09, and if an investor buys shares at $28.16 and sells this call, they could achieve a total return of 17.51% if the stock is called away at expiration, highlighting the attractiveness of this strategy.
- Risk Assessment: Current data suggests a 79% chance that the $22.00 put option will expire worthless, while the $32.00 call option has a 59% chance of doing the same, indicating that investors should monitor these probabilities for informed decision-making.
See More
Coinbase Reports Q4 Revenue Decline of 5%
- Revenue Decline: Coinbase reported total Q4 revenue of $1.78 billion, down 5% quarter-over-quarter, missing the Street consensus estimate of $1.85 billion, indicating potential market demand weakness that could impact future growth.
- Earnings Beat: Despite the revenue drop, Coinbase's adjusted earnings per share were 66 cents, surpassing the Street consensus estimate of 64 cents, demonstrating the company's strong performance in cost management and operational efficiency.
- Stock Price Surge: Coinbase shares jumped 13% to $159.44 on Friday, reflecting investor confidence in the company's profitability, even though overall revenue fell short of expectations.
- Market Environment Impact: The broader U.S. stock market declined, with the Dow Jones falling around 0.2% on Friday, indicating macroeconomic pressures on tech stocks that may affect Coinbase's future market performance.
See More
Pinterest Misses Q4 Revenue Expectations
- Revenue Shortfall: Pinterest reported Q4 revenue of $1.32 billion, falling short of analyst expectations of $1.33 billion, indicating competitive pressures that may undermine future investor confidence.
- Earnings Miss: The company posted adjusted earnings of 67 cents per share, below the anticipated 69 cents, reflecting challenges in profitability that could lead to shareholder scrutiny of management.
- Significant Stock Decline: Pinterest shares plummeted 19.5% to $14.95 in pre-market trading, a drastic move that may raise concerns about the company's future performance and influence investor decisions.
- Mixed Market Sentiment: U.S. stock futures showed mixed results, with Dow futures down about 0.2%, reflecting cautious market sentiment potentially linked to Pinterest's earnings report, further exacerbating investor unease.
See More
Arista Networks Surges Amid AI Networking Demand
- Earnings Growth Outlook: Arista Networks (ANET) reported strong demand for ethernet switches and routers in its quarterly results, now projecting a 25% revenue growth for the year, up from a previous target of 20%, highlighting the company's pivotal role in AI infrastructure spending.
- Stock Performance Excellence: Since May 2022, ANET's stock has outperformed the S&P 500 by 362%, reflecting strong market confidence in its growth potential, with CEO Ullal emphasizing the company's central role in mission-critical network transactions.
- Surge in Deferred Revenue: The company reported deferred revenue of $5.37 billion, indicating a growing backlog, and investors will closely monitor the conversion of multistage projects to ensure cash flow supports higher innovation spending.
- Positive Market Reaction: In pre-market trading, ANET's stock surged over 10%, demonstrating a positive market response to its robust performance and growth outlook, further solidifying its leadership position in the AI networking sector.
See More
Applied Materials Reports Strong Q1 Results, Shares Surge
- Strong Financial Results: Applied Materials reported first-quarter revenue of $7.01 billion, exceeding analyst expectations of $6.87 billion, indicating robust demand in the semiconductor equipment market and reinforcing its market leadership.
- Earnings Beat: The company posted adjusted earnings of $2.38 per share for the first quarter, surpassing the $2.20 estimate, reflecting improved cost control and operational efficiency, which is likely to attract more investor interest.
- Stock Surge: Following the earnings report, Applied Materials shares jumped 11.9% to $367.50 in pre-market trading, indicating a positive market sentiment towards the company's growth prospects, potentially boosting investor confidence further.
- Positive Q2 Guidance: The company issued second-quarter guidance above market expectations, demonstrating management's confidence in future performance, which is expected to drive more capital inflows and enhance its competitive position in the industry.
See More
Toast Shares Decline Over 26% Year-to-Date Amid Mixed Q4 Results
- Earnings Highlights: Toast's Q4 revenue rose 22% to $1.63 billion, surpassing Wall Street's expectation of $1.61 billion, although its earnings per share (EPS) of $0.17 fell short of the $0.24 estimate, indicating strong revenue growth but insufficient profitability.
- Market Reaction: Toast's stock closed at $26.14, giving it a market value of $13.5 billion, with shares down over 26% year-to-date, likely heading for its worst annual loss since going public in 2021, reflecting investor concerns about the company's valuation.
- Investment Strategy: The company is heavily investing in new verticals, products, and AI, with plans to achieve adjusted EBITDA of $775 million to $795 million by 2026, demonstrating confidence in future growth prospects.
- User Sentiment Shift: Retail sentiment on Stocktwits shifted from 'bullish' to 'extremely bullish', although some users questioned the company's financial reporting, highlighting a divide in market perceptions regarding Toast's future performance.
See More
