It’s 9 am here in Dublin as I sit down to write this Fastball, so what better company to research alongside my cup of coffee than one called Toast?
Is Toast a good investment?
Toast is disrupting the breakfast industry.
Well, kind of. Toast is a ‘restaurant-tech’ company (which includes breakfast, I suppose) that provides end-to-end solutions to help restaurants with things like payment processing, ordering & delivery, marketing, and even staff management.
Toast has had a very complicated route to market thus far. The company was growing fast until the COVID-19 pandemic hit, forcing management to lay off half of its workforce as restaurants across the globe shuttered indefinitely.
However, the pivot to take-out and outdoor dining eventually worked in Toast’s favour and, by the third quarter of 2020, revenue was increasing again from the prior year. In fact, the company was doing so well that it held a secondary share sale last November that allowed employees to sell up to 25% of vested shares, valuing the company at $8 billion.
Toast has gone from strength to strength since and is now eyeing up a hefty valuation of as much as $16 billion when it floats later this week. This potential doubling of its valuation is driven by a massive increase in restaurant locations served (48,000 vs 27,000 in 2019) and a big jump in annual recurring revenue run-rate (+118%).
Investors be warned though. Most of Toast’s revenue comes from fees paid by customers for payment transactions — a costly way of making money that leads to margins of about 20%. Indeed, Toast recorded a whopping net loss of $248 million last year and that deficit seems to be increasing.
For more on Toast and it’s impending IPO, keep an eye on what our analysts have to say in the MyWallSt app this week.
Toast’s Total Addressable Market
Wow, looks like there’s a lot of bread to made (I’ll get my coat).
Head of Content and Publishing at MyWallSt
James is the Head of Content and Publishing at MyWallSt. James’ favorite stock is Teladoc because he believes that they are at the forefront of revolutionizing the healthcare industry.