Toast
stock was falling sharply after the cloud-based platform for restaurants narrowed its revenue guidance.
Toast stock (ticker: TOST) tumbled 18% to $14.15 in premarket trading Wednesday. It was a Barron’s stock pick earlier this year.
When the company posted third-quarter earnings on Tuesday, it said for full-year 2023, it expects revenue of $3.83 billion to $3.86 billion, compared with a prior call of $3.81 billion to $3.87 billion. However, it lifted its guidance for adjusted earnings before interest, tax, depreciation, and amortization.
“So, gross payment volume per location coming down in September in particular is when we started to see that trend, it’s continuing into October,” said Chief Financial Officer Elena Gomez on the earnings call. “And so, our guidance reflects the macro playing a role.”
That same-store sales headwind will weigh on the company’s revenue, BTIG analysts Andrew Harte and Thomas Smith wrote in a Tuesday report, adding that “it is a macro factor largely out of management’s control.” Something a bit more specific to the company itself? Toast pulled back its forecast for fourth-quarter software-as-a-service average revenue per user growth to mid-to-high single digits from an earlier call of 10%. Harte and Smith rate Toast stock at Neutral.
Mizuho Securities analysts led by Dan Dolev also mentioned a slowdown in gross payment volume, among other concerns. The analysts had downgraded Toast stock in early October to Neutral from Buy, noting that GLP-1 drugs such as Ozempic that slow digestion “could weigh on Toast’s volumes.” They lowered estimates, and cut their price target on Toast stock to $14 from $16 in a Wednesday report.
William Blair analysts led by Stephen Sheldon who rate shares at Outperform were feeling more optimistic.
“Overall, while top-line trends are softening some, growth remains very strong, and Toast is executing well on the factors it controls offset slightly by incremental macro headwinds,” they wrote in a Wednesday report.
For the third quarter, Toast saw annualized recurring revenue run rate reach $1.22 billion, rising 40% year-over-year. It posted a loss of 9 cents a share, slimmer than the19 cent-loss in the year-ago quarter. Revenue was $1.03 billion, higher than $752 million a year ago.
Write to Emily Dattilo at emily.dattilo@dowjones.com
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