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On Friday, BMO Capital Markets adjusted its outlook on Toast Inc. (NYSE:TOST), reducing the price target from $48.00 to $44.00, though still well above the current trading price of $32.85. Despite this change, the firm maintained its Outperform rating on the company's shares. According to InvestingPro data, Toast has shown significant momentum with a 9.23% return over the past week, while analyst targets range from $26.40 to $60.00. Analyst Rufus Hone provided insights into the rationale behind the adjustment, citing a high single-digit percentage lead for the first quarter of 2025 as well as the full year. The revised forecasts take into account expectations for gross payment volume (GPV) per location and the addition of new locations in line with previous quarters.
Hone's analysis for the first quarter of 2025 includes assumptions of steady growth in GPV per location and the number of new locations, which aligns with past performance despite headwinds such as the leap day effect, adverse weather conditions, and typical seasonal patterns. This outlook is supported by Toast's impressive 28.33% revenue growth over the last twelve months, with the company generating $4.96 billion in revenue and achieving positive EBITDA of $111 million. Additionally, the expectation is for consistent growth in Subscription Services revenue per location and a Financial Technology net take rate slightly above street expectations.
Looking ahead to the full year 2025, BMO Capital's estimates are buoyed by a modest improvement in GPV, which includes easing headwinds for GPV per location and slightly stronger growth in new locations. The firm also anticipates better monetization outcomes, with the financial technology gross take rate projected to be approximately one basis point higher than the consensus and nearly two percentage points stronger growth in average subscription services revenue per location compared to consensus figures.
BMO Capital's outlook remains more optimistic than the consensus, which anticipates an EBITDA margin expansion of around 340 basis points. Hone suggests that the consensus may be too conservative and that there could be potential upside, given the implied assumption of deteriorating unit economics does not align with the firm's more positive expectations. With 8 analysts recently revising their earnings estimates upward and Toast's next earnings report scheduled for May 13, 2025, investors seeking deeper insights can access comprehensive analysis and 10 additional key tips through InvestingPro's detailed research report.
In other recent news, Toast Inc. reported fourth-quarter earnings that exceeded expectations, with total revenue surpassing DA Davidson's projections by 2% and adjusted EBITDA coming in 16% above forecasts. This prompted DA Davidson to raise their price target for Toast from $38 to $42 while maintaining a Neutral rating. Toast has also provided initial guidance for 2025, forecasting a 23%-25% year-over-year growth in Non-GAAP FinTech & Subscription gross profit and a 37%-42% increase in adjusted EBITDA. Wells Fargo (NYSE:WFC) upgraded Toast's stock rating from Underweight to Overweight, setting a new price target of $39, citing significant market share gains and the acquisition of Potbelly (NASDAQ:PBPB)'s as key factors. Evercore ISI initiated coverage on Toast with an In Line rating and a $29 price target, highlighting challenges such as a slowdown in average revenue per user and concerns about sustainability amid economic uncertainties. UBS maintained a Buy rating with a $47 price target, expressing confidence in Toast's ability to expand into new growth markets by 2025. Bernstein analysts noted potential high single-digit negative revisions in gross profit and double-digit EPS revisions for Toast in a recession scenario, given its exposure to new business formation and discretionary spending.
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