Toast (TOST) Stock: Is It a Good Buy Right Now or Should You Wait?
Established in 2012, Toast is a point of sale system that serves more than 40,000 restaurants across the U.S. The company went public with an initial public offering in September 2021 that was successful enough to turn its three founders into billionaires. But does this mean that Toast will have long-term success? Should you buy now or wait to see what happens?
The Technology Behind Toast
The founders of Toast have proven they are innovators through every step of their journey as entrepreneurs. Their first out-of-the-box decision came when they chose to use Android technology instead of Apple, even though Apple had market supremacy at the time.
They assessed the pros and cons of each, determining that the benefits of working with Android would greatly outweigh the challenges. That choice continues to pay off today as Toast continually tweaks its technology with the changing times — including during the COVID-19 pandemic.
Future Growth Predictions
Past performance isn’t always indicative of future results. But a company with a strong foundation and a history of smart decisions is likely to succeed in the future. Toast has an excellent track record of growth and innovation.
The COVID-19 pandemic challenged businesses big and small — especially those in the restaurant industry. Toast turned a situation that could have been devastating into an opportunity to help its restaurant partners pivot to processing pick-up orders.
Since it’s IPO, Toast has announced several new products to help restaurants succeed in an environment that continues to pose a variety of challenges, from changing business models to labor shortages. The first is a business debit card that gives restaurants faster access to sales data and provides cash-back rewards from top suppliers. Toast is also providing direct integrations with takeout and delivery channels, with orders going straight to the POS system so that restaurants can compare profitability across channels. Finally, streamlined payroll tools automatically calculate pooled tips so that employees can use their Toast Pay Card to draw a portion of pooled tips and wages instantly, at no cost to employers — a major benefit, considering that 76% of restaurant workers cited low pay and tips as the top reason they’re leaving the restaurant industry, Restaurant Dive reported.
Keep in Mind
The POS market is booming and highly competitive. In a crowded market, it’s easy to get lost in the noise. Businesses in this niche area are challenged to stay several steps ahead or get left in the dust. Toast continues to prove that it can withstand the current economic conditions despite impressive competition.
The tides can turn at any time. A new POS system may hit the market and take over with fresh innovation. An existing competitor can come out with a new design that bests what Toast has to offer.
Financial Ups and Downs
Despite a valuation of more than $5 billion prior to the COVID-19 pandemic, Toast laid off half of its employees early in 2020. It also reported a loss of $235 million for the first half of 2021. This is a reminder that even successful businesses struggle, and there is always the potential for loss.
Toast is still operating at a loss, but in its Nov. 9 earnings release for the third quarter of 2021, the company reported that revenue grew to $543.8 million, a 105% increase from the previous year. Gross payment volume was up 77%, and gross profits were up 72%.
Should You Buy TOST?
Toast opened on the day of its IPO at $65.26 per share. As of Nov. 17, 2021, a share costs $47.16, making it an affordable option for investors who want to buy whole shares of a company. Interested investors should take the leap now, while the company is still young and treat it as a long-term investment opportunity.
Daria Uhlig contributed to the reporting for this article.
Information is accurate as of Nov. 18, 2021.
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