Payment Tech Firm Toast Could Reach profitability In 2025: Goldman Sachs Upgrades Stock

Goldman Sachs analyst Will Nance upgraded the shares of Toast Inc TOST to Buy with a price target of $24.

Investor sentiment remains very negative, as weaker ARPU and GPV trends have dominated investor conversations, says the analyst.

However, the analyst notes this is very well-telegraphed, short interest remains elevated, and the market is not accounting for what the analyst expects to be materially better profitability trends in 2024.

The analyst is incrementally less negative on the TAM debate at TOST as the company is likely to reach higher levels of market share in its core SMB market than most investors appreciate.

The analyst notes TOST’s best in class software platform will continue to outpace competitors for new restaurant wins.

The analyst’s 2024 adjusted EBITDA estimates, which is 17% above street estimates, could put GAAP profitability in 2025 in reach. 

The analyst says TOST’s valuation compares more favorably to software oriented peers, where it trades at a discount.

The analyst says that the continued momentum on location additions and better-than-expected profitability should be near-term catalysts that should more than offset the well telegraphed weakness in ARPU and per-location-spending.

Price Action: TOST shares are trading higher by 2.42% at $19.25 on the last check Wednesday.

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