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On Thursday, BMO Capital Markets updated its outlook on Toast Inc. (NYSE:TOST), increasing the price target to $48 from the previous $46, while maintaining an Outperform rating on the shares. The adjustment comes after Toast, a company specializing in restaurant technology and payments, reported fourth-quarter trends that exceeded expectations. According to InvestingPro data, Toast’s stock has delivered an impressive 83.56% return over the past year, though current analysis suggests the stock may be trading above its Fair Value.
The BMO Capital analyst highlighted several key performance indicators that underpinned the positive assessment, including recurring gross profit growth, gross payment volume per location, Software (ETR:SOWGn) as a Service (SaaS) average revenue per user, and adjusted EBITDA. These metrics were generally better than anticipated, signaling robust health within the company’s operations. Toast’s revenue grew by 28.33% in the last twelve months, with the company maintaining a healthy current ratio of 2.44, indicating strong liquidity management.
Despite Toast’s initial guidance for recurring gross profit growth in 2025 being slightly softer compared to the consensus, the analyst expressed confidence in the company’s potential. The conservative guidance is seen as a starting point that could provide room for upside as the year progresses. This perspective is supported by the company’s strategic focus on sales and marketing (S&M) and research and development (R&D) investments, which have been scaled up relative to the previous year.
In response to the company’s performance and forward-looking strategy, only minor adjustments were made to the long-term estimates by BMO Capital. The firm’s decision to lift the price target reflects a belief in Toast’s capacity to continue thriving in the U.S. restaurant technology and payments market.
The analyst concluded with an optimistic stance, reinforcing the sentiment that Toast Inc. is positioned as a long-term winner in its industry. The new price target of $48, up from $46, is indicative of the firm’s confidence in the company’s growth trajectory and investment strategy.
In other recent news, Toast Inc. reported its fourth-quarter 2024 earnings, presenting a mixed financial picture. The company posted an earnings per share (EPS) of $0.05, which was below the expected $0.17. However, Toast’s revenue exceeded expectations, reaching $1.34 billion against a forecast of $1.31 billion. Despite the EPS miss, the company achieved its first full year of GAAP profitability and added a record 28,000 net locations in 2024. Analysts from firms like Goldman Sachs and Morgan Stanley (NYSE:MS) have shown interest in Toast’s growth strategy, particularly its expansion into international markets and new customer segments. Toast’s financial projections for 2025 include a recurring gross profit stream growth of 23-25% and adjusted EBITDA between $510 million and $530 million. The company continues to focus on expanding its total addressable market in the U.S. restaurant sector and investing in international and retail segments. These developments highlight the company’s strategic focus on sustainable growth and market expansion.
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