Toast Rallies After Guidance Tops Analyst Estimates

© Reuters. Toast (TOST) Rallies After Guidance Tops Analyst Estimates

By Sam Boughedda

Toast Inc (NYSE:TOST) shares rallied Friday morning, hitting a high of $21.76 per share after the company reported earnings for its second quarter, topping profit and revenue estimates.

The company, which posted the earnings after the close Thursday, revealed a Q2 loss per share of $0.11, $0.01 better than the analyst estimate for a loss of $0.12 per share. Revenue for the quarter came in at $675 million versus the consensus estimate of $651.28 million.

Annualized recurring run-rate (ARR) was $787 million, up 59% year-over-year, while Gross Payment Volume (GPV) increased 62% to $23.3 billion.

"Toast had another great quarter, sustaining our operating momentum with a record number of net new locations and strong revenue growth, both of which highlight the power of our industry-leading digital platform for restaurants," said Toast CEO, Chris Comparato

Toast said it sees Q3 revenue between $700 and $730 million, above the consensus of $665 million. Meanwhile, full-year revenue is expected to be between $2.62 billion and $2.66 billion, again beating the consensus of $2.54 billion.

Following the report, analysts at Morgan Stanley and Wells Fargo released notes:

A Morgan Stanley analyst maintained an Overweight rating and raised the price target on Toast shares to $29 from $27. "Once again, Toast outperformed expectations across revenue & EBITDA, Software & FinTech, Locations & GPV, and within Q2 results & Q3/FY22 guidance. Management noted it is not seeing impact from 'macro', with significant momentum across their business sustaining thus far into Q3, while at the same time fully acknowledging the macroeconomic backdrop in the US, from food cost inflation to labor constraints and higher wages and uncertainty in consumer spending. Accordingly, management said it has been 'measured in our guidance for the rest of the year to factor in that uncertainty and the potential for slower consumer trends,'" said the analyst.

A Wells Fargo analyst maintained an Overweight rating and raised the firm's price target on Toast to $27 from $23. He told investors, "Toast is a Gladiator at this point: crushing everything in its path."

"The company is growing its revenue rapidly, beating expectations handily, raising its full-year guidance, and also becoming more efficient over time," wrote the analyst. "We expect to see further strong expansion in revenue and EBITDA in '22/'23—raising our estimates and PT to $27, based on a 4.0x EV/S multiple to our '23 revenue estimate."