Toast Inc, the Technology sector company, was revisited by a Wall Street analyst today. Analyst Tien Tsin Huang from J.P. Morgan maintained a Hold rating on the stock and has a $52.00 price target.
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Tien Tsin Huang’s rating is based on a combination of factors that reflect both the strengths and challenges facing Toast Inc. The company demonstrated strong performance in the second quarter, surpassing expectations in recurring gross profit and EBITDA metrics, and achieving significant growth in net locations. This positive momentum is supported by management’s strategic investments in expanding growth market verticals and securing new enterprise wins, which are expected to contribute to Toast’s annual recurring revenue targets.
However, despite these positive developments, there are concerns about the costs associated with this growth, as indicated by the guidance for lower sequential EBITDA in the third quarter. Additionally, the hardware margins were more negative than anticipated, which could be seen as a customer acquisition cost. While Toast’s valuation remains high relative to its growth peers, the competitive landscape and macroeconomic uncertainties, such as inflation and discretionary spending, pose risks. As a result, Tien Tsin Huang maintains a Hold rating, acknowledging the company’s potential for growth while being cautious about its current valuation and market conditions.
In another report released today, Goldman Sachs also maintained a Hold rating on the stock with a $51.00 price target.