Toast Inc (NYSE:TOST) was initiated with a Buy rating and $26 price target by BofA analysts in a note Thursday.
The analysts said their checks at last week's National Restaurant Association (NRA) conference "illustrated that TOST delivers best-in-class, cloud-native, point-of-sale (POS) software/hardware technology to the restaurant industry."
"Beyond POS, the innovative TOST platform integrates payment processing, restaurant operations, digital ordering and delivery, team and table management, payroll, lending, and reporting/analytics," the analysts wrote.
They also see an opportunity for Toast to capture additional market shares and believe the company has a "sharpened focus" on profitability and free cash flow.
"TOST has captured only ~10% of the estimated 860K US restaurants and forecasts US TAM may hit $55B by '24. TOST has traditionally excelled in the US SMB part of the restaurant market, with more recent initial signs of traction upmarket, overseas, and with hotel restaurants," explained the analysts.
"Adj. EBITDA margins have steadily improved the past five quarters and TOST forecasts positive adj. EBITDA for 2H23. FCF is also expected to turn positive later this year."