Toast could see huge gains following a surge in restaurant revenues in the U.S., says Baird. Analyst David Koning initiated Toast with an outperform rating, saying in a note to clients on Monday that the restaurant software company would benefit from a series of catalysts. These include "above-GDP growth" for restaurants, "increasing software modules per restaurant" and the potential to expand into international markets. The firm set a $25 price target, representing 53.7% upside from Monday's closing price. Year to date, Toast's stock price has tumbled 53%. "Toast has gained share (currently ~7% of US restaurant locations), and ongoing share gains seem likely (with potential for geo expansion), along with increased yield per location," Koning wrote. "We think a mid-$20s stock is likely within a year (was ~$65 a few months ago)." Toast provides payments software to restaurants, just as restaurant revenues are expected to outpace gross domestic product growth in coming years. Rising inflation and ease in ordering delivery from apps are also expected to help the sector. Thus far, Toast services 57,000 restaurants in the U.S. In the long-term, it could expand overseas, Koning said, who also noted: "We like 25%+ revenue growth profile for several years with strong earnings power over time and clean balance sheet ( > $2/share)." Shares for the software company jumped 4.5% before the bell Tuesday.
Woman eating a burger.
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