Toast's 134% Rise in 2024: Time to Invest?

Toast (TOST) has been a star performer in 2024, with its shares soaring 134% year-to-date. Investors are wondering if this is the right time to buy into the supercharged stock. Let's analyze Toast's growth story, financial performance, and competitive landscape to make an informed decision.

Toast's growth is driven by its expansion strategy, focusing on small businesses. The company has added 7,000 new restaurant locations as customers in the last quarter, bringing its total to 127,000. This targeted approach has contributed to Toast's impressive sales growth of 28% year-over-year in the first nine months of 2024. Additionally, Toast's ability to sign up new customers has translated into strong financial performance, with a net income of $56 million in Q3 2024, reversing a $31 million net loss in the same period last year.



Toast's leveraging of AI and machine learning technologies has also enhanced its competitive edge. The company offers a comprehensive suite of hardware, software, and financial services, providing real-time data analytics, predictive maintenance, and automated inventory management to its clients. This advanced technology suite has contributed to Toast's impressive growth prospects, with Wall Street consensus estimates projecting a compound annual growth rate (CAGR) of 22% in its top line between 2024 and 2026.

Toast's strategic acquisitions have been another key driver of its success. By acquiring companies like Omnivore and Foodcombinator, Toast has expanded its suite of services and enhanced its position as a comprehensive solutions provider for restaurants. These acquisitions have not only expanded Toast's customer base but have also strengthened its competitive position in the market.



Toast's focus on sustainability and ESG initiatives has also resonated with consumers and the market. The company's commitment to using renewable energy and reducing food waste has contributed to its impressive growth in 2024. Toast generated $3.6 billion in revenue in the first nine months of 2024, up 28% from the same period in 2023. Despite the high price-to-sales ratio of 5.2, Toast's strong fundamentals and market position make it an attractive investment opportunity.

However, investors should be aware of the competitive landscape in the restaurant technology sector. Established players like Square and new entrants like OpenTable pose challenges to Toast's market position. Nevertheless, Toast's economic moat, bolstered by switching costs and positive word-of-mouth, helps it maintain a competitive edge against rivals and new entrants.

In conclusion, Toast's impressive 134% gain in 2024 can be attributed to its strong sales growth, consistently profitable quarters, and a growing customer base. While the high price-to-sales ratio might deter some investors, Toast's robust fundamentals and market position make it an attractive investment opportunity. However, investors should monitor Toast's financial performance and valuation, as well as the competitive landscape, to ensure its growth remains sustainable.