Toast is Wednesday's pick for IBD 50 Growth Stocks To Watch as the restaurant software player sits in a newly formed flat base. Toast stock was pulling back Wednesday in heavy trading, giving back gains from the prior two sessions.
The IBD 50 name operates a cloud-based digital platform used by restaurants. The platform allows for point-of-sale transactions and payments, and assists with operations, digital ordering and delivery.
Toast ranks No. 1 out of 36 stocks in the Finance-Credit Card/Payment group. That sector holds a strong No. 29 spot out of the 197 industry groups that Investor's Business Daily tracks.
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Toast Stock Sits In A Base Despite Pullback
Shares dipped just below their 21-day exponential moving average in Wednesday's drop.
The restaurant software stock is in a stage-two flat base with a 45.56 buy point, according to MarketSurge pattern recognition. Toast broke out of a cup-with-handle base with a 36.75 buy point in heavy volume, following its earnings report May 8. Shares hit a 52-week high, before weakening and forming the flat base.
Its relative strength line is also ticking lower and has been erratic since November.
Toast stock has been trading back near a level not seen since November 2021. Despite Wednesday's drop, the stock has outperformed 93% of stocks that IBD tracks.
Fintech Name Sees Soaring Profits
On May 8, Toast reported lower-than-expected profit and slightly lower revenue for its fiscal first quarter. But its annual recurring revenue rose 31%, topping estimates.
The company expects second-quarter subscription services to grow in the 26% to 29% range.
"Toast kicked off the year with a fantastic first quarter — we added over 6,000 net new locations, grew our recurring gross profit streams 37%, and delivered $133 million in Adjusted EBITDA," Toast Chief Executive Aman Narang said in the earnings release. EBITDA refers to earnings before interest, taxes, depreciation and amortization, a measure of profitability.
Its pace of sales growth has mostly slowed over the last seven quarters, with a 24% rise in the first quarter. Projections show 23% growth for the second quarter, with an average 20% over the following three quarters.
Where Toast Is Expected To Go
Analysts call for full-year 2025 profit of 92 cents per share, up from four cents per share in 2024, following five years of losses. Forecasts see 2026 earnings rising to $1.11 per share.
Its IBD Accumulation/Distribution Rating of B+ indicates fairly heavy institutional buying over the last 13 weeks.
Four names on the IBD Mutual Fund Index hold Toast stock, including the T. Rowe Price New Horizons Fund, with a 15.55 million share position. In addition, Toast's 1.5 up/down volume ratio shows positive demand over the last 50 days.
Lastly, it holds a best-possible 99 Composite Rating.
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