On Friday, Oppenheimer initiated coverage on shares of Toast Inc. (NYSE: NYSE:TOST), a cloud-based platform serving the restaurant industry, with an Outperform rating and a price target of $46.00. According to InvestingPro data, Toast has demonstrated remarkable momentum with a 145.55% return over the past year, with analyst targets ranging from $27 to $50. The firm's analysis suggests that Toast's technology is well-positioned to benefit from the restaurant industry's transition from traditional systems to integrated, multi-channel software solutions.
According to Oppenheimer, Toast is expected to achieve a compound annual growth rate (CAGR) of 25% in recurring gross profit over the next two years, which is slightly higher than the consensus estimate of 24%. This projection aligns with Toast's current performance, as InvestingPro data shows the company achieving 29.5% revenue growth in the last twelve months, though operating with a modest gross profit margin of 23.36%. For the fourth quarter of 2024, the firm forecasts recurring gross profit growth of 37%, and for the full year 2025, an increase of 28%. Both projections are 2% above the consensus estimates.
The firm's analysts believe that the financial guidance for 2025 will be conservative but should align with the company's medium-term targets. This conservative guidance is anticipated to be positively received by investors.
Oppenheimer highlighted Toast's valuation, noting that the stock is trading at just 0.4 times enterprise value to gross profit (EV/GP) growth. Based on InvestingPro's Fair Value analysis, Toast appears to be trading above its intrinsic value. The platform offers 10+ additional exclusive ProTips and comprehensive valuation metrics in its Pro Research Report, helping investors make more informed decisions about Toast's $22.72B market cap position.
Toast Inc. is poised to continue its market share expansion as it capitalizes on the ongoing shift within the restaurant industry towards comprehensive, cloud-based solutions. The company maintains a healthy financial position with a strong current ratio of 2.41, indicating robust liquidity to support its growth initiatives. The firm's positive outlook on Toast's growth trajectory and market position has led to the initiation of coverage with a favorable rating and a price target that reflects confidence in the company's future performance.
In other recent news, Toast Inc., a restaurant technology and payments specialist, has been the focus of several analyst actions. BMO Capital Markets initiated coverage on the company with an Outperform rating, based on the firm's belief in Toast's long-term market potential. This comes despite mixed sentiments from DA Davidson and Goldman Sachs, both of which downgraded the company's stock from Buy to Neutral citing concerns over margin expansion expectations for 2025.
On the earnings front, Toast has shown strong execution with revenue growth of 29.5% in the last twelve months, though it currently operates with relatively low gross profit margins of 23.4%. BMO Capital's analysis suggests that current market expectations might underestimate the company's future performance, particularly regarding recurring gross profit per location.
In addition to these developments, Toast, in partnership with Uber Technologies (NYSE:UBER), is expanding delivery options for U.S. restaurants. This extended collaboration integrates Toast Delivery Services with Uber Direct, aiming to reduce delivery costs and expand delivery areas for restaurants. Lastly, recent positive shifts in sentiment among American small and medium-sized businesses are expected to boost technology investments, with companies like Toast Inc. identified as potential beneficiaries of this trend.
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