On Friday, UBS reaffirmed its Buy rating and $31.00 price target for Toast Inc (NYSE:TOST), a company specializing in restaurant software solutions. The firm's analysis focused on the Total Addressable Market (TAM) for the U.S. restaurant sector, which is relevant to Toast's potential market share growth.
The analysis provided by UBS offers an illustrative framework to estimate the number of U.S. restaurant locations that Toast could potentially acquire each year. According to this framework, Toast is expected to achieve a low to mid-30% share of new restaurant cloud Point of Sale (POS) locations by 2025-2030, an increase from the high 20% range seen recently.
This growth is predicated on Toast's ability to penetrate both the high-end enterprise market and the market for smaller restaurants.
UBS's projections take into account the contributions from both international markets and the Food & Beverage Retail sector. The assumption is that growth in these areas will alleviate some of the pressure on Toast to gain market share within the core U.S. restaurant segment.
Specifically, by 2030, the analysis anticipates Toast will add approximately 17,000 international locations annually, a figure that aligns with the company's past U.S. growth rates around 2019. Additionally, around 5,000 locations are expected to be added within the Food & Beverage Retail sector.
The UBS report also suggests that the number of core U.S. restaurant locations added each year will range between 37,000 to 42,000 for the period from 2025 to 2030. However, the net number of U.S. location additions is forecasted to decrease from around 25,000 currently to approximately 18,000 by 2030.
This decline is attributed to an increasing base of locations that will no longer be in operation, a common phenomenon for growing enterprises as they reach market saturation.
Toast Inc's ability to continue gaining market share in the U.S. is crucial for its growth strategy. The UBS analysis indicates that the company's medium-term goals for net new location additions are within reach, assuming continued expansion in both domestic and international markets, as well as within related retail sectors.
In other recent news, Toast Inc. has been the focus of several analyst firms' evaluations. Mizuho upgraded Toast Inc.'s stock from Neutral to Outperform, suggesting potential cost savings could boost growth. Mizuho also increased the company's price target to $33.00, based on the anticipation that Toast Inc. could become a significant US retailer by 2025.
RBC Capital Markets maintained a "Sector Perform" rating, emphasizing the company's plans to achieve over 20% recurring gross profit growth annually. Morgan Stanley (NYSE:MS) reaffirmed an Overweight rating with a $29.00 price target, highlighting the company's expanding total addressable market and robust growth vectors. Piper Sandler reiterated a Neutral rating on Toast's stock, maintaining a $25.00 price target.
Needham maintained a Buy rating with a steady price target of $30.00, noting Toast's ambitious financial targets and strategies for expansion. These recent developments indicate a generally positive sentiment towards Toast's growth trajectory from several analyst firms. Despite some concerns about the company's ambitious financial targets, the overall consensus remains optimistic.
InvestingPro Insights
As UBS maintains a positive outlook on Toast Inc (NYSE:TOST), the latest metrics from InvestingPro align with the company's growth trajectory. Analysts anticipate that Toast's net income will grow this year, a sign of potential profitability that could bolster investor confidence. Additionally, the company has seen four analysts revise their earnings upwards for the upcoming period, indicating a bullish sentiment on its financial performance.
InvestingPro data further reveals that Toast has experienced a notable 52.88% price uptick over the last six months, showcasing strong market momentum. Moreover, the company's revenue growth of 36.68% over the last twelve months as of Q1 2024 underscores its expanding market presence. Although Toast operates with a negative P/E ratio of -55.77, reflecting its current lack of profitability, its substantial revenue growth and positive price movements suggest a promising outlook for the future.
For investors seeking a deeper dive into Toast's financials and future prospects, InvestingPro offers even more insights. With a total of 11 additional InvestingPro Tips available, including an examination of the company's liquidity and debt levels, investors can gain a comprehensive understanding of Toast's financial health. To access these insights and optimize your investment strategy, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.