Toast, A Category Killer In Restaurant POS And Software Likely For Further Share Gains: Analysts

Mizuho analyst Dan Dolev maintained Toast Inc TOST with a Buy and lowered the price target from $24 to $23. Toast's 4Q results were strong. Yet the -23% stock reaction yesterday was primarily driven by the Q/Q decline in SaaS ARPU. 

The analyst believes a better KPI is the SaaS ARR per location, which increased ~5% Q/Q in 4Q. Dolev reduced revenue estimates for FY23 and FY24 to $3.62 billion and $4.86 billion, respectively, from $3.68 billion and $4.91 billion previously. 

Dolev views TOST as the category killer in restaurant PoS and software services and a top pick in the sector.

Keybanc analyst Josh Beck maintained Toast with an Overweight and lowered the price target from $30 to $26.

Toast reported a headline beat with revenue ~2% above the Street, in-line locations, and EBITDA coming in ahead by $6 million, with RR (defined as Subscription Revenue + FinTech Gross Profit) above by ~3% and guided roughly in line on revenues and above on EBITDA. 

Beck reduced RR estimates in 23/24 on lower subscription ARPU assumptions while maintaining above-street EBITDA due to lower expenses, which prompts a lower price target. 

The analyst saw TOST as a critical idea positioned for further share gains and ARPU expansion and is encouraged by the long-term margin framework and consistent payback periods in the mid-teens (months). 

Credit Suisse analyst Timothy Chiodo maintained Toast with a Neutral and raised the price target from $21.5 to $23.

Toast delivered a strong quarter with net location additions of ~5.5k, roughly in line with Q3 additions and the overall pace in 2022. The FY 2023 revenue guidance was slightly above Street at the high-end and assumed a relatively stable net take rate which he found conservative absent a more material macro deterioration.

The analyst was optimistic about the business and saw the potential for upside to estimates (SaaS ARPU, FinTech take rate, International expansion, Delphi Display Systems expanding TAM to drive-through). However, he sought a more attractive entry point and incremental signals supportive of monetization upside.

Price Action: TOST shares traded lower by 5.23% at $18.98 on the last check Friday.