BY MARK SEBASTIAN
November 16, 2023
Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Bill Griffo will chime in with macro analysis and Andrew Giovinazzi will then finish out the week with a volatility breakdown.
Have a stock YOU want us to review? Email my team here. – Mark
Hey Traders,
Remember Pets.com….I sure do mostly because in an advertising ploy they sued Triumph the Insult Comic Dog….
In fact that company is the face of failed internet businesses in many ways…It is interesting that a name like Chewy might have actually figured out the model they tried to build more than 20 years ago.
The fact is that for every major success in the start up business there are at least 10 fails.
Then there are the ones we THINK are going to fail…but don’t. Remember when AAPL was 13 dollars, split adjusted the stock was .25 in March of 2003…
Today we are going to take a look at a former high flier, that might be toast….that is right…we are looking at TOAST Inc.
That chart is not pretty for TOST:
Since going public, outside of the 1st few months, the trajectory has been straight down…while off the ALL time lows…the stock is pretty darn close.
Let’s look at the numbers:
Despite the selling the stock has a market cap of 7.95 billion. The company loses money…a lot of money, over the last 12 months they have lost 310 million dollars on revenue of 3.6 billion.
TOST has cash of 1.91 dollars per share, but has negative cash flows of -.53 per share over the last year. That gives them about a 3 year run way.
Revenue per share is great at 6.83 dollars per share…which tells me they have a margin problem…they are not making enough money per sale.
Toast is an all in one Restaurant management system…it manages food availability, ordering, online ordering, payments…you name it.
They are in about every industry: pizzeria, cafe, diner…you name it.
The software is actually pretty cool….and has produced huge sales…just not profits.
The issue is that revenues are growing…profits are actually increasing … .my guess is they have an acquisition cost issue….the cost of getting a new customer is too high.
On a positive note, the company only has about 1 billion in debt…
So where is the company going?
TOST is probably not TOAST…but they need to start making money. This seems like a realy good acquisition target. Maybe someone as huge as an Amazon or Google…but they might actually be a good fit for a company like Block Inc.
Remember TOST does POS processing, a company like SQ would love to have exclusive access to 100k restaurants.
Near term, this stock is probably a short as I think it could be heading for a new low…especially in this interest rate environment…
Long term I think the company ends up being acquired for 7 bucks a share or so.
I would be a put buyer.
Your only option,
Mark Sebastian
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Mark Sebastian
Founder & CEO, Option Pit
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