Should I Buy Toast (TOST)? Finance YouTuber Analysis

The YouTuber sees Toast as a long-term buy-and-hold, highlighting its position as the operating system for restaurants with significant growth tailwinds and a 30%+ 5-year CAGR. Despite recent stock drawdown, he notes its 17x forward P/E, growing subscription revenue, and expanding operating profit, driven by its network effect and potential to move into ancillary businesses like grocery stores.

“So if you have a long-term time horizon, I think Toast is going to be one one of those stocks that you want to own, just buy and hold because it's going to be prevalent everywhere.”

The analyst expresses interest in Toast's dominant position in the restaurant POS niche but is unwilling to buy at its current valuation. Despite strong free cash flow, the company is unprofitable, and its price to free cash flow of 86 is considered expensive, especially with only 25% expected growth and significant competition from larger players like Square and PayPal.

“this is a business that I would love to own but I want to own it at a no-brainer price and I just simply don't know where that is today given the fact that the company is not profitable and it's not trading at a compelling price to free cash flow multiple.”

The YouTuber reports that Michael Burry sold his entire position in Toast. This is presented as part of a general trend of selling out of tech companies that have become expensive.

“CVS he sold out of toast Oracle booking holding alphabet and Warner Brothers Discovery even Amazon sold out of that position entirely”

The analyst believes Toast is an attractive long-term investment due to its strong market share in the restaurant POS system, its ability to integrate various services, and its large total addressable market. While the company is not yet consistently profitable, it is showing signs of improving profitability and positive free cash flow. He would consider buying if the enterprise value drops slightly below its current $7.5 billion.

“I would like to get it a little bit cheaper than that but I don't think that's an exorbitant price to pay for the business that you're getting and the stickiness of that business.”

The analyst is intrigued by Toast due to its significant customer growth, adding over 20,000 new restaurant locations in the past year. While current financials like free cash flow and profitability are weak, the business model suggests that initial high sales and marketing expenses for new customers will pay off in 2-3 years as they adopt more profitable software modules. The company is showing improving financial metrics, with gross profit margin increasing and SG&A as a percentage of revenue decreasing for four consecutive quarters, indicating a positive trend overlooked by the market.

“What intrigues me about toast is apparently something that they're doing is working so if you look over the past year one year ago 62 000 restaurants using their products and services right now up to eighty five thousand so just in the past year we've added over 20 000 new restaurant locations to the toast platform so apparently something that they're doing is working.”

The speaker owns shares of Toast and appreciates its technology for streamlining the restaurant checkout process. He believes the company's solution addresses a common pain point for diners, making it a valuable investment.

“I'm I'm own shares of the stock, but like can I have a check? Yes. Here it is right here. I have the control. I just want to press a button. Literally the last fork full. I want to drop the fork and walk out of the restaurant.”

The YouTuber suggests Toast as a potential buy, noting its 42% drop from its all-time high presents an interesting entry point. Toast provides a comprehensive technology platform for the gastronomy sector, including POS, payment processing, and personnel management, with high customer retention. Recent growth includes a 22% revenue increase and nearly 50% adjusted profit growth, with analysts expecting 28% annual earnings growth. The forward P/E is around 18. Risks include dependence on the restaurant sector and a relatively low gross margin for a software company.

“Die vierte Aktie heißt Toast und bietet eine führende Technologieplattform für die Gastronomie an.”

The YouTuber sees Toast as a leading provider of software and hardware solutions for restaurants, offering an integrated platform that streamlines operations. Despite high growth rates (30% ARR, 26% revenue growth), the current valuation (Forward P/E of 32, P/FCF of 43) is considered ambitious. He would buy on a significant price drop due to its clear competitive advantage and large expansion potential in the US market (currently 13% share).

“Bei einem stärkeren Kursrückgang würde ich aber hier sofort zugreifen, da ich in dieser integrierten Lösung für Restaurants einen klaren Wettbewerbsvorteil zu anderen Lösungen sehe.”

The YouTuber labels Toast a 'wild card' because it's difficult to predict how AI will impact its restaurant software and POS solutions. He notes that the current negative sentiment towards payment processors has created a favorable valuation, but lacks specific industry knowledge to form a stronger opinion.

“It has created a favorable valuation as far as Toast is considered. Um, and if you have more industry specific knowledge, maybe it wouldn't be a wild card for you.”

The YouTuber suggests buying Toast (TOST) as a disruptor in the restaurant technology industry, dominating its market with 13% share of US restaurants. Despite recent stock declines due to weaker consumer spending, the company is still growing revenue at over 20% and earnings at over 30%. The upcoming earnings report is expected to be a catalyst, with an average analyst price target of $46, representing 46% upside.

“Toast is a disruptor in the restaurant industry with that restaurant software. Starting off with mobile ordering and paying and social experiences, but then really moving into everything that a restaurant would need in its back office.”

The analyst recommends Toast Inc. due to its strong position as a software payments leader in the restaurant industry, with a 13% market share and a platform disrupting the $1 trillion market. He highlights expected revenue growth above 20% and earnings projected to double this year, making the current valuation of 3.77x price-to-sales attractive compared to historical levels.

“With Toast, we see that 23 20% revenue growth expected this year. next that above 20% revenue growth that we like to see with all these growth stocks to buy. More importantly though, we want to look at earnings growth as well.”

The YouTuber highlights Toast as a disruptive company in the restaurant industry, offering an end-to-end platform. It has a strong market foothold, consistent 20% sales growth, and is posting positive earnings, with per-share earnings expected to more than double.

“Here again, we have that 20% growth in sales, one of the key indicators we're looking for with expectations for 6 billion in sales this year. But what really surprised me, not only is Toast posting positive earnings, its per share earnings are expected to more than double over this year and next.”

The YouTuber is taking a closer look at Toast, a restaurant software provider, after its stock fell 16%. He notes its 30%+ sales growth and attractive valuation at 3.3 times sales, along with a net cash balance sheet and profitability. He plans to 'back up the truck' if further research confirms a competitive advantage in the growing restaurant automation industry.

“If as I do my further research I want to find make sure that it has that competitive Advantage among its industry peers it's clearly a growth industry this automation software automation for restaurants since I can find this toast has a competitive competitive Advantage it's going to be able to keep up that growth rate in this growth industry I'm gonna be backing up the truck on this one.”

This creator views Toast as a strong candidate for growth in the digital wallet ecosystem, with its My Toast and Toast Takeout apps serving as early examples of consumer digital wallets. They expect significant revenue expansion through closed-loop payments, merchant banking, and the monetization of employee digital wallets by disintermediating traditional payment systems.

“in total we think block toast and Shopify can scale their monetization of their Merchants employee base from approximately $100 million today to a $25 billion opportunity in 2030 at an annual growth rate of 123%”