On Wednesday, Toast Inc. (NYSE: TOST) received an upgrade from Redburn-Atlantic, shifting the stock's status from Neutral to Buy. The firm has set a price target for the company at $28.00, indicating a positive outlook on the stock's future performance.
Redburn-Atlantic's decision to raise the rating of Toast Inc. is based on several key factors. The firm acknowledges Toast's "underappreciated pricing power" and "enhanced operating leverage" as central to its potential for sustained revenue growth. The analyst also points to the company's ability to maintain a stable gross payment take rate, even as it brings larger merchants on board, as a strong sign of its pricing power over small and medium-sized business (SMB) merchants.
The firm further anticipates that Toast will likely implement software price increases, which could lead to further earnings upgrades. This expectation is supported by the maturation of Toast's extensive product suite. As a result, the analyst believes that a rerating of the company's stock is justified.
The positive sentiment is also tied to resilient restaurant spending, which shifts the focus towards the longevity of Toast's revenue growth. Redburn-Atlantic positions Toast at the forefront of the industry in terms of revenue growth, suggesting a robust future for the company in the competitive market.
Toast Inc.'s new rating and price target reflect Redburn-Atlantic's confidence in the company's market strategy and growth trajectory, as articulated in the analyst's comments.
InvestingPro Insights
As Toast Inc. (NYSE: TOST) enjoys an optimistic upgrade from Redburn-Atlantic, real-time data from InvestingPro further complements the positive outlook. Toast's market capitalization stands at a solid $9.95 billion, reflecting its significant presence in the industry. Notably, the company's revenue has shown a remarkable increase, with a growth of 45.33% over the last twelve months as of Q3 2023, which aligns with Redburn-Atlantic's recognition of Toast's sustained revenue growth.
InvestingPro Tips highlight that analysts are predicting Toast will turn profitable this year, which supports Redburn-Atlantic's expectations of earnings upgrades due to potential software price increases. Additionally, Toast's liquid assets surpass its short-term obligations, indicating a strong financial position that could support its growth strategies. However, it's worth noting that two analysts have revised their earnings downwards for the upcoming period, suggesting that investors should keep an eye on the upcoming earnings reports for potential adjustments to the company's outlook.
For investors looking to delve deeper into Toast's financial health and future prospects, InvestingPro offers additional insights. There are 8 more InvestingPro Tips available for Toast Inc. at https://www.investing.com/pro/TOST, which can be accessed with an exclusive offer. Use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription.
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