Why Toast (TOST) Stock Is Trading Up Today

What Happened:

Shares of restaurant software platform Toast (NYSE:TOST) jumped 12.3% in the morning session after company reported an impressive "beat and raise" quarter. Second quarter results came in ahead of analysts' expectations. It was also milestone quarter for Toast as it won a deal with Marriott, exceeded $1 billion in ARR, and reached adjusted EBITDA profitability and positive free cash flow for the first time since the IPO. On top of that, the company raised its revenue and adjusted EBITDA guidance for the full year, topping analysts' expectations. Overall, it was a strong quarter for the company.

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What is the market telling us:

Toast's shares are very volatile and over the last year have had 46 moves greater than 5%. But moves this big are very rare even for Toast and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The previous big move was three months ago, when the stock gained 6.57% on the news that the company reported an impressive "beat and raise" quarter. First quarter results exceeded analysts' revenue, adjusted EBITDA, and earnings per share estimates, though cash burn increased. While gross margin improved significantly relative to the previous quarter, it was still below estimates. Regardless, revenue guidance for the next quarter came in above Consensus, and the full-year revenue guidance was lifted. Adjusted EBITDA guidance for the full year was also raised with the mid-point of the guidance projected for margins to be nearly breakeven.

Toast is up 34.5% since the beginning of the year, but at $23.59 per share it is still trading 11.8% below its 52-week high of $26.76 from July 2023. Investors who bought $1,000 worth of Toast's shares at the IPO in September 2021 would now be looking at an investment worth $377.70.

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