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On Friday, Evercore ISI increased the price target on Toast Inc. (NYSE:TOST) shares to $34, up from $34, while maintaining an In Line rating. The restaurant technology company, currently valued at $21.18 billion, has demonstrated resilience with a "GOOD" Financial Health Score according to InvestingPro data. The firm acknowledged Toast’s ability to stand out from its competitors by avoiding the macroeconomic pressures that have negatively impacted similar companies. Despite concerns about weaker new location additions, the company’s performance in average revenue per user (ARPU) and annual recurring revenue (ARR) along with an optimistic guide for the future, has kept their outlook stable.
Toast’s recent financial results were seen as largely positive, with impressive revenue growth of 26.72% over the last twelve months and a healthy current ratio of 2.51, according to InvestingPro data. The firm highlighted Toast’s strong commentary regarding new location additions expected in the second quarter. This optimism contributed to the decision to raise the 12-month price target to reflect anticipated higher revenue from payment processing and subscription services.
However, Evercore ISI also pointed out that, given Toast’s current market valuation at 33 times next twelve months (NTM) enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), there is limited tolerance for any potential earnings disappointments in the coming year. This concern is reflected in the stock’s remarkably high P/E ratio of 1,251, as reported by InvestingPro, which offers comprehensive valuation metrics and 8 additional key insights for subscribers. The firm’s revised price target already factors in an acceleration in new location additions, which they had anticipated in their estimates.
The research firm further explained that the importance of new location additions has intensified for the second quarter. While the price target increase reflects higher ARPU levels for payments and subscriptions, Evercore ISI remains cautious about the potential for further stock price growth following the after-market rise. They reiterated their In Line rating, signaling a neutral stance on the stock’s current valuation and future prospects. According to InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels. Investors can access Toast’s complete Pro Research Report, along with detailed analysis of 1,400+ other US stocks, through an InvestingPro subscription.
In other recent news, Toast Inc. reported its first-quarter 2025 earnings, revealing a mixed financial performance. The company’s earnings per share (EPS) of $0.09 fell short of the expected $0.18, and revenue slightly missed expectations, coming in at $1.34 billion against a $1.35 billion forecast. Despite these shortfalls, Toast raised its full-year outlook, projecting significant growth in FinTech and subscription gross profit, with an anticipated adjusted EBITDA of $550 million. The company highlighted robust growth in key areas, such as a 31% year-over-year increase in Annual Recurring Revenue (ARR) and a 37% rise in gross profit from FinTech and subscription services.
Toast also announced a notable enterprise win with Applebee’s, a part of Dine Brands, enhancing its credibility in serving large-scale operations. The company’s expansion into new markets, such as international and food and beverage retail, is on track, with expectations to cross 10,000 locations in 2025. Analyst firms like Wolfe Research and UBS have shown interest in Toast’s enterprise and AI innovations, with the latter discussing the attractive payback periods for large deals like Applebee’s. The company continues to invest in AI and platform expansion, with initiatives like the AI assistant Sous Chef currently in pilot phases.
Additionally, Toast’s Gross Payment Volume (GPV) reached $42 billion, marking a 22% increase from the previous year. The company remains focused on scaling its location and market share, particularly in the U.S. restaurant sector, while also exploring new growth opportunities in segments like enterprise and retail. Despite potential risks such as supply chain disruptions and regulatory changes, Toast’s management expressed confidence in the company’s ability to navigate the current macroeconomic environment.
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