Despite getting grilled soon after its September 2021 IPO, Toast, which provides technologies for restaurants, has found its footing, as well as a spot on the IBD Leaderboard watchlist. TOST stock now stands ready to serve up a fresh breakout — if the market cooperates.
While Toast did not make this month's list of new buys by the best mutual funds, the company has established clear signs of institutional demand. It sports a B+ Accumulation/Distribution Rating and a 1.3 up/down volume ratio.
Plus, T. Rowe Price New Horizons (PRNHX) owns 2.57% of TOST stock, according to MarketSurge data. The highly rated fund upped its stake from 8.09 million shares to 11.22 million shares in the most recent quarter. In total, 61% of its TOST shares are held by funds, according to MarketSurge.
Nineteen funds with an A+ rating from IBD have a position in TOST stock.
But as the Nasdaq falls below 16,000 and its 50-day moving average Monday, Toast has reversed lower to test support at its 50-day benchmark.
Toast Popping Toward Profitability
Based in Boston, Toast works with restaurants of all types around the country, from fast-casual. quick delivery and food trucks, to pizza, fine dining and hotel restaurants. Through its cloud-based platform, the Toast tool kit offers point-of-sale solutions, payment processing, payroll management and more to help restaurants run and growth their businesses.
Toast saw its business soar amid the Covid pandemic as consumers shunned in-dining and instead ordered takeout and delivery. But 2024 is expected to be the year it turns in its first annual profit. The company expects to go from a loss of 46 cents in 2023 to earnings of 39 cents per share this year.
In terms of revenue, quarterly sales eclipsed the $1 billion mark in both Q3 and Q4. Estimates for the first quarter call for $1.05 billion, which would mark a 27% year-over-year increase.
TOST Stock Tests Buy Point After Post-IPO Plummet
After a short-lived breakout attempt in November of 2021, TOST stock fell into a long and steep decline. While Toast has now regrouped to set up a potential new breakout, it's feeling the heat as the market comes under pressure.
In November, Toast reset its base count by undercutting the low of its prior pattern. So the current formation is a first-stage cup with handle. Such early-stage patterns have a better chance of nailing down big gains. At five weeks long, the handle can also now be viewed as a flat base.
Viewed either way, the buy point is 25.63. The relative strength line is taking a breather after a recent spike. Turmoil in the general market has pushed shares of TOST down over 5% Monday. See if the stock can show resilience to close the day and this week above the 50-day and 10-week lines.
Note that Toast reports earnings on due May 7.
Follow Matthew Galgani on X (formerly Twitter) at @IBD_MGalgani.
