Toast, a provider of restaurant software, is the IBD Stock Of The Day. Toast stock has advanced 29% in 2025 heading into the company's second quarter earnings report due in early August.
On the stock market today, shares fell 1.1% to 46.12. Toast trades in a buy zone with an entry point of 45.56 after breaking out Thursday.
Toast's products range from point-of-sale hardware, kitchen displays, payment processing, supplier and invoice management to payroll, delivery management, menu consultation and marketing programs.
"Toast's cloud-based, all-in-one digital technology platform should continue to fuel market share gains by capturing the restaurant industry's ongoing shift from legacy technology to omni-channel, integrated software solutions," said Oppenheimer analyst Rayna Kumar in an initiation on the company.
She added: "Toast's strategy to scale its core restaurant business, monetize its software products and expand its total addressable market through new verticals and geographies should continue to drive above-industry-average gross profit and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) gains."
Restaurant Software: Crowded Market
Deutsche Bank analyst Nate Svensson said in a recent report: "Toast has one of the best platforms for serving restaurants, leading to share gains and persistently high gross payment volume growth. (The company) has made rapid strides in profitability, having reached GAAP profitability in 2024, and expects to materially improve profitability going forward."
Toast's main competitors include Square-parent Block, Fiserv's Clover, Shift4, Lightspeed, TouchBistro and SpotOn.
Meanwhile, Toast recently announced that it has won deals with Applebee's and Topgolf.
Jefferies analyst Samad Samana expects a strong June quarter.
"Last quarter, Toast announced the addition of Applebee's with over 1,400 locations, as well as Topgolf, which includes both restaurant and retail service. We expect management to build on this momentum in Q2 with additional logo announcements," he said.
Samana added: "We expect Toast to take a constructive approach to guidance as it builds on a strong first half, with management at least carrying forward any Q2 beat."
With Toast earnings due in early August, investors may want to be cautious ahead of the report. One strategy around earnings would be to use call options. That approach would let investors cap their possible loss while still letting them participate in any post-earnings upside.
Toast Business Expanding
In the March quarter, Toast earnings rose 53% to 9 cents on an adjusted basis. Revenue climbed 24% to $1.344 billion.
In addition, annual recurring revenue rose 31% to $1.713 million, topping estimates of $1.689 million.
Live customer locations increased 25% to 140,000, above estimates of 137,100.
Toast has been building up its portfolio of software products.
In 2024, Toast announced an artificial intelligence-based tool called Sous Chef. It provides restaurant managers with customer insights to drive sales growth.
"Through Toast's proprietary mobile application, Toast Now, users can manage restaurants with real-time reporting and communication with staff, including ability to view sales data across multiple locations, view which employees are working, manage breaks and decide menu items," Kumar said. "Additionally, Toast can connect the front of the house with the kitchen staff through its Kitchen Display System, which integrates all ordering stations with the kitchen, automates cooking order by required preparation time and provides order status notifications to customers."
The company was founded in 2012. Toast's initial public offering in 2021 raised $870 million.
Based in Boston, the company also has U.S. offices in Chicago, Omaha, Reno, San Francisco and Nashville. Toast's software runs on cloud-computing infrastructure at Amazon Web Services, part of Amazon.com.
In 2020, the company rolled out Toast Capital, which provides loans to restaurants.
Further, the company has expanded into Canada, the U.K. and Ireland.
Toast Stock Technical Ratings
Meanwhile, Toast stock holds an IBD Composite Rating of 98, according to IBD Stock Checkup. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Toast stock has an Accumulation/Distribution Rating of B-plus. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling. The rating, on a scale of A+ to E, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying, a C grade is neutral.
Meanwhile, Toast stock has a 21-day ATR of 4.25%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
IBD suggests stocks with ATRs of up to 8% in the current market.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
