Comedy rock legend and Michigan mainstay Heywood Banks is perhaps best known for his song about toast. Seriously, if you haven’t heard it, try it sometime; you’ll never hear a song glorifying toasted bread that hard ever again. Recently, analysts revealed they felt much the same way about Toast (TOST), the restaurant services company. But investors weren’t feeling that same love and sent shares down fractionally in the closing minutes of Thursday’s trading. Mizuho Securities, via analyst Dan Dolev, hiked its rating on Toast from Neutral to Outperform.
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He suggested there was a possibility ahead that Toast could lower its credit processing costs. That’s one of Toast’s biggest expenses and would open up a path to much greater profitability.
Dolev noted that Toast may be overpaying its credit interchange rates, especially compared to others in the industry. If that’s the case, there may be a chance to renegotiate current fees to a much more market-friendly standard. Once that part of the plan goes live, there’s upside potential afoot. In fact, Dolev estimates anywhere between 30% and 60% in gains.
People Are Starting to Eat at Home More
However, lurking in the background, according to a Fox Business report, is the revelation that people are starting to eat at home quite a bit more in the face of still-rampant inflation. Restaurants up and down the spectrum—such as Darden Restaurants (DRI)—have been noting declines in attendance and price hikes, both of which are likely connected to each other.
Is TOST Stock a Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on TOST stock based on eight Buys, 10 Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 16.87% rally in its share price over the past year, the average TOST price target of $26.75 per share implies 1.1% upside potential.
