On Thursday, Piper Sandler reiterated a Neutral rating on Toast Inc. (NYSE:TOST) stock, maintaining a $25.00 price target.
During Toast's investor day, which featured presentations from executives including cofounders Aman Narang and Steve Fredette, the company discussed several key strategies.
These included plans for vertical and geographic expansion, ways to leverage monetization within their core offerings, and their financial goals for both the medium and long term, focusing on margins and recurring gross profit growth.
The company has set ambitious margin targets, aiming for combined EBITDA margins of 30-35% within the next 2-3 years and long-term margins exceeding 40%.
Additionally, Toast has set a minimum goal for at least 20% annual growth in recurring gross profit. While this figure is presented as a baseline rather than an explicit target, it has prompted some investors to consider the implications for the company's growth trajectory in fiscal year 2025 and beyond.
Despite the significant margin targets, the investor day left investors with mixed reactions. Those with a bearish outlook on Toast did not find clear answers to their structural concerns, while bullish investors were encouraged by the prospect of the company achieving EBITDA margins of over 30% in the near future.
Toast Inc., a provider of cloud-based restaurant software, has been at the center of discussions among investors who are weighing the potential of the company's growth and profitability strategies. The divergent views on the company's future underscore the ongoing debate about its valuation and market prospects.
InvestingPro Insights
As Toast Inc. (NYSE:TOST) continues to navigate the competitive landscape of cloud-based restaurant solutions, real-time data and analyst insights provide a deeper understanding of the company's financial health and market position. According to InvestingPro data, Toast boasts a substantial market capitalization of $13.12 billion, reflecting significant investor interest. The company's revenue has shown impressive growth, with a notable 36.68% increase in the last twelve months as of Q1 2024, and a quarterly revenue growth of 31.26% in Q1 2024, indicating strong sales performance.
InvestingPro Tips suggest that analysts are optimistic about Toast's future profitability, with net income expected to grow this year and four analysts having revised their earnings upwards for the upcoming period. This aligns with the company's ambitious margin targets discussed during their investor day. Additionally, Toast's liquid assets exceed its short-term obligations, which could provide financial flexibility to support its strategic expansion plans. However, it's important to note that the company has not been profitable over the last twelve months, and its stock price movements have been quite volatile, which may influence investor sentiment.
For those looking to delve further into Toast Inc.'s financial metrics and analyst predictions, InvestingPro offers additional tips and insights. Readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to a comprehensive suite of investment tools and data. With more tips available on InvestingPro, investors can make informed decisions about the potential risks and opportunities associated with Toast Inc.
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