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On Thursday, Compass Point adjusted its outlook for Toast Inc. (NYSE:TOST) by reducing the company’s price target from $49.00 to $47.00, while still holding a positive view of the stock with a Buy rating. According to InvestingPro data, Toast currently trades at a high earnings multiple with a market capitalization of $23 billion. The firm’s analyst cited changes in the company’s financial forecasts, including a lower-than-previously-anticipated adjusted gross profit (GP) and adjusted operating income for the fiscal year 2025, as the basis for the adjustment. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its intrinsic value.
Despite the revised price target, Compass Point stands firm on its optimistic stance towards Toast shares. The company’s strong financial position is evident in its revenue of $4.96 billion and healthy current ratio of 2.44, indicating solid liquidity. The analyst believes that the company’s current fiscal year guidance will serve as a conservative baseline, with expectations for Toast to outperform these projections. While growth in the second half of 2025 is expected to slow compared to the first half, due to challenging year-over-year comparisons, the company is still anticipated to experience growth in the low-twenties to high-teens percentage range. InvestingPro data shows impressive price performance, with the stock gaining over 83% in the past year.
The tempered forecast is influenced by a one-time factor related to the annual recurring revenue (ARR) conversion. However, Compass Point suggests that Toast is well-positioned to surpass expected GP growth, driven by a recovery in same-store sales (SSS) and potential upside from take rates and cost of revenue (COR) leverage.
Toast’s international expansion is progressing, with the company on track to reach 10,000 locations by the end of 2025. Although investors may remain skeptical about the sustainability of Toast’s market share gains in the U.S., where it held a 15% share as of the fourth quarter of 2024, Compass Point notes the company’s success in high-density markets and with enterprise clients. Moreover, Toast’s pricing strategy is not solely dependent on compensating for potentially less profitable enterprise agreements.
The analyst also highlighted that Toast’s management does not foresee any significant impact from tariffs on restaurants and is actively diversifying its supply chain away from China. This strategy aims to mitigate potential risks and contribute to the company’s robust growth trajectory. For a comprehensive analysis of Toast’s financial health, growth prospects, and more detailed metrics, investors can access the full Pro Research Report available on InvestingPro, which offers in-depth analysis of 1,400+ top US stocks.
In other recent news, Toast Inc. reported its fourth-quarter 2024 earnings, showcasing a mixed financial performance. The company recorded an earnings per share (EPS) of $0.05, which was below the forecasted $0.17, but exceeded revenue expectations with $1.34 billion against a predicted $1.31 billion. Despite the EPS miss, Toast achieved its first full year of GAAP profitability and added a record 28,000 net locations in 2024. Analyst firms have reacted to these developments, with Keefe, Bruyette & Woods raising Toast’s stock price target to $42 while maintaining a Market Perform rating, following the company’s earnings release. Canaccord Genuity also raised its price target to $48, emphasizing Toast’s market share growth and potential in international markets. BMO Capital Markets echoed this sentiment, increasing its price target to $48 based on strong fourth-quarter trends and maintaining an Outperform rating. These recent developments highlight Toast’s robust growth trajectory and continued expansion in the restaurant technology and payments market.
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