Toast stock drops as Evercore ISI notes pricing pressure in lower-end market

Investing.com - Toast Inc (NYSE:TOST) shares fell 7-10% on Monday following a FactSet report indicating lower week-over-week pricing for its monthly starter kit. The company, with a market capitalization of nearly $24 billion and revenue growth of 26% over the last twelve months, has shown significant stock price volatility according to InvestingPro data.

Evercore ISI maintained its In Line rating and $40.00 price target on Toast , noting that the pricing change aligns with their thesis that competition is intensifying in the lower segments of Toast’s serviceable addressable market (SAM), such as casual dining and quick-service restaurants. InvestingPro analysis indicates the stock is currently trading near its Fair Value, with analyst targets ranging from $36 to $60.

The research firm highlighted that unlike in fine dining where Toast dominates with a superior product commanding premium prices, the lower-end market features more comparable competitive offerings typically charging less for both hardware and software.

Other point-of-sale software providers also traded lower Monday, though not as significantly as Toast, with one competitor down only about 2% compared to Toast’s steeper decline.

Evercore ISI characterized Toast as "the premium pricer in the market," suggesting it faces greater risk from pricing compression compared to challengers in the space.

In other recent news, Toast Inc. has garnered attention following its strong second-quarter earnings report. Analysts have responded positively, with several firms adjusting their price targets. Truist Securities increased its price target to $51, maintaining a Buy rating, citing expectations for faster recurring gross profit growth in the coming years. JPMorgan also raised its target to $52, highlighting Toast’s better-than-expected recurring gross profit and EBITDA metrics. Bernstein SocGen Group increased its price target to $48, noting the company’s addition of 8,500 new locations during the quarter. RBC Capital raised its target to $50, acknowledging Toast’s strong annual recurring revenue growth and record net location additions. Baird maintained a Neutral rating with a $48 target, focusing on Toast’s starter kits aimed at smaller restaurants. These developments reflect a positive outlook among analysts regarding Toast’s recent performance and growth trajectory.

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