Toast stock price is on track to rise for the second consecutive week of gains as investors flock back to fintech companies. Its surge accelerated on Thursday after the company published strong financial results and boosted its forward guidance. It has now jumped by over 172% from its lowest level in 2022, and is hovering at its highest swing since January of that year.
Fintech stocks are doing well
Toast stock price surge mirrors that of other companies in the financial technology industry. For example, PayPal stock has jumped by over 50% this year, and is hovering at its highest level since February 2023.
Similarly, Affirm stock jumped to $50, much higher than the August low of $22, while Block, the parent company of Square, is up by over 80% from its 2023 lows.
This recovery is happening at a time when most of these companies are seeing moderate – but profitable growth. This is a sharp contrast to what they did in the past when they were all focusing on growth at all cost.
Most of these firms have slashed workers to preserve cash. They have also worked on boosting their offerings since competition is increasing. Most of this competition is coming from other tech giants like Amazon, Google, and Apple.
Toast stock jumped after earnings
The TOST share price jumped by almost 20% in the after-hours, reaching to a high of $39, its highest level in almost three years.
These numbers showed that its Annual Recurring Revenue or ARR jumped by 28% in the third quarter to $1.6 billion. This growth happened as retail spending in restaurants continued doing well in the quarter.
Some of its top clients like Sweetgreen, Cava, and Joe Coffee have reported strong growth, with many of them opening new store locations. In all, store locations increased by 28% YoY to 127,000.
Its Gross Payment Volume (GPV) jumped by 24% in the quarter to $41.7 billion. Revenue rose by from $1.032 billion in Q3’23 to $1.3 billion in Q3’24. Most of this revenue came from its technology solutions, followed by its subscriptions and hardware. The nine-month revenue also jumped from $2.8 billion in 2023 to $3.6 billion.
The most important part of Toast’s business is that it turned a profit in the last quarter as its revenue growth coincided with reduced costs.
The management also boosted its revenue guidance for the fourth quarter and annually. Its subscription revenue and financial technology division is expected to grow by between 32% and 35% to between $370 million and $380 million.
For the year, analysts see its subscription revenue coming in at between $1.39 billion and $1.4 billion.
Read more: Toast stock is trading at a discount: Goldman Sachs
Growth to continue
A likely catalyst for the Toast stock price is that the Federal Reserve has started to cut interest rates, a sign that inflation is falling.
Lower rates will, in theory, lead to more consumer spending, especially in the restaurant industry, which will lead to more sales.
The other important catalyst for the TOST stock is that it may continue gaining market share, especially among smaller restaurant brands.
As such, analysts believe that Toast’s annual revenue will grow by 26% this year to $4.88 billion. They also expect that the revenue figure will move to $6.02 billion in the coming year.
Additionally, analysts believe that Toast has now entered a new era of profitable growth. They see it losing 29 cents a share this year followed by a 29-cent profit in 2025.
Still, the key challenge that could hurt the company is that competition in the checkout industry is set to intensify as companies seek to gain market share. Some of the most notable competitors are firms like Square for Restaurants, Clover, Lightspeed, and TouchBistro.
Another key issue is that the company’s valuation is relatively stretched since the company is now valued at almost $20 billion. Therefore, it needs to keep its revenue and profits to justify this growth trend.
Read more: Goldman Sachs: Buy Carnival, Micron, Toast, and Pfizer stocks
Toast stock price analysis
The daily chart shows that the TOST share price has been in a strong rally in the past few months. It recently crossed the important resistance point at $27.86, where it formed a double-top pattern between May and July this year. Moving above that level invalidated one of the most bearish signs in the market.
The stock has remained above the 50-day and 100-day moving averages, signaling that bulls are in control. Also, the Relative Strength Index (RSI) and the MACD indicators have all pointed upwards and are at their overbought levels.
Therefore, the Toast stock price will likely continue rising as bulls target its all-time high at $69.70. To do that, the shares will need to cross the psychological level at $50. If this happens, it means that it will jump by over 100% from the current level.
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