Not many stocks can boast what Toast has done. The maker of tech tools for the restaurant industry has more than doubled in price this year — beating the likes of megacaps like Meta Platforms in the process — despite suffering a sharp fall earlier this month.
The niche payments play not only achieved that feat but is back near a buy point. So strong performance and its recent move to profitability make Toast stock Wednesday's pick for IBD 50 Stocks To Watch.
The stock went through a character change and surged after reporting profits in its second and third quarters. Now, analysts are bullish on Toast's full-year outlook and expect earnings of 57 cents per share for 2024 after five years of losses.
Shares tumbled 10% on Dec. 4. It appears mutual funds rushed to book profits after the stock rallied on third-quarter results. Regardless, it managed to jump 109% year to date, beating Meta's 75% gain.
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Toast stock's pullback leaves it near a buy point of 37 off the 10-week moving average.
Shares started trading on the New York Stock Exchange on Sept. 22, 2021. Its initial offering price was 40, and Toast shares reached their all-time high of 69.93 in November 2021. But the stock nosedived as the company reported losses each quarter.
Toast Stock Soars On Profit Pivot
Before this fall, Toast stock hadn't cracked the psychological level of 30 since February 2022, but it reported a profitable second quarter on Aug. 8, putting it on the path toward that level. Earnings per share of 3 cents helped the stock clear the 50-day moving average.
Shares ultimately cracked the 30 level in late October, then broke out from a first-stage base and surged on Nov. 8 after the company announced its third quarter was also profitable. Sales grew 26% to $1.3 billion while earnings of 7 cents a share marked a reversal from a 9-cent loss the prior year.
The company has a bullish outlook for the current quarter and full year. Toast says it expects $375 million in profits at the midpoint of its range from its subscription services and technology platform in the fourth quarter. For the full year, it predicts profits of $1.4 billion at the midpoint.
As a result, Toast stock surged 45% in November, past the 40 mark, before pulling back in December.
Toast offers software and technology tools for restaurants to manage sales, payments, orders and deliveries and for team management. Its Composite Rating is 96 out of a best-possible 99, according to IBD Stock Checkup. Its Relative Strength Rating stands at 95.
Toast's Earnings Per Share Rating of 81 is considered adequate. Investor's Business Daily recommends EPS ratings of 80 or above.
The stock also holds a top-notch Accumulation/Distribution Rating of A. Mutual funds own 62% of outstanding shares. The T. Rowe Price New Horizons Fund (PRNHX) and the Virtus KAR Mid-Cap Growth Fund (PHSKX) hold shares of Toast stock. Both funds are in the IBD Mutual Fund Index.
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