One Wall Street analyst sees 25% downside for Toast stock

It is important to remind all stock analysts that an increase in the target price does not automatically imply a buy recommendation.

An expert on specialty tech stocksToast (NYSE: TOST)A notable example of this dichotomy is the adjustment to the company's target share price. This analyst is concerned that the company will face increasing competition and will struggle to win the large customers it needs to drive the key basic noodles higher.

Does Toast get burnt?

Wells Fargo BankCertificates (Wells Fargo(Securities) analyst Jeff Cantwell is a bearish booster of the company, and in mid-April, he raised his estimate of Toast's fair value by $2 to $17 per share, but reiterated a hold recommendation (in other words, sell). The target price (which the analyst expects to reach in the next 12 months) is 25% below the share price where it was previously.

In his research report on target price movements, Cantwell focused on the full-year 2024 guidance provided by Toast, a company that specializes in pre-order and koonware. Describing Toast's forecast for the year as "mixed," the analyst said the company's key microfactors are new restaurant sign-ups, per-unit gross payout (GPV) levels and average revenue per user (ARPU).

Regarding these factors, Cantwell wrote, "While there are reasons for each of these (KPIs) to perform well on their own, it is difficult to assume that all three will do so at the same time, given that we believe the average store noodle should continue to decline.

Competition and high valuations

Toast follows the classic pattern of tech startups-while occasionally announcing impressive revenue growth figures, it usually suffers losses. In addition, while the company's technology is certainly useful for restaurants and other businesses in the food and beverage space, competitors exist - a notable example being theBlock-And Toast is overvalued. I think Cantwell is right about this stock.

Should you invest $1,000 in Toast now?

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Wells Fargo is an advertising郃 partner of The Ascent, a Motley Fool company. eric Volkman does not hold any of the above stocks. the Motley Fool holds recommendations Block and Toast. the Motley Fool has a disclosure policy.

A Wall Street Analyst Says Toast Stock Has 25% of Downside was originally published by The Motley Fool.