Earnings Date : Feb 15 2022
Market cap:13.93
52 Week Hi:69.93
52 Week Low: 18.72
Current: 27.59
As a summary Tost Tab offers a POS system hardware/software and also restaurants management software. They are also offering delivery services but with no commission , Loans etc . Tost targets mom/pop joints and not restaurant conglomerates that have the staff to develop their own POS / ordering sytstem. I need to research their product offerings but these are the things that I have been observing.
With labor shortages in the service sector I am seeing TOST in alot of the restaurants I go to. I was in Johnson city Texas and even some of the restaurants there had them. They are using the terminal to scan qr codes and have you order from your phone. Allows restaurants to operate with less people attending tables / billing.
I spoke to the manager of a Tex-mex joint and they recently had just migrated to TOST 4 months ago. He likes it since it automates the tipping so you dont have to type it in and helps manage the management of the restaurants. The hardware is expensive and it takes time for your staff to learn the system. Apparently they only offer videos and no real training for your staff. This is key here since it shows retention because of the high cost of hardware and cost of training the staff. ( I remember seeing the actual costs of each devices somewhere but dont have them on me right now )
Looking at their twitter thread https://twitter.com/ToastTab/with_replies?lang=en . You will see that people are messaging them that their POS system is down on Feb 11. This could be both good and bad but im treating this as a bullish sign. Usually when a system like this goes down its due to a overload of the system due to high traffic which can cause a web service to be bottlenecked or go down. I would think that they are facing traffic that they are not used to ( They could just have terrible architecture because they are a recent startup). This is what made me want to play this after finding these twitter responses.
Ortex has this at 39.13% short of FF , 100% utilization , and 17.59% AVG CTB. This is a normal for the tech stocks that was used to hedge during the Jerome Powell hawkish fiasco. However a contractual obligation to have an upward pressure is nice and if the market sentiment changes , lookout for small caps.
5)This had the recent bottom of 18.72 which increased around 50 percent to 27.59 (Pullback from Ukraine fiasco from high of 29.45) With this fallback and possible Monday dip might give more ample move to the upside since it has ran up so much already.
Other Companies earnings report are showing the consumers are spending. There are articles that seem to support an increasing trend of consumer restaurant dining. The Return to Normal: Views on the Pandemic | Morning Consult (This is just 1 quick google with 1 salt so grain of salt is needed)
Risks
1)Macro forces dictate movement but if we look at TOST and compare to other shorted/hedged small caps , TOST is outperforming them and does not move as much.
2)Earnings is on Feb 15 on the afternoon. FOMC is released at 2pm on the 16th i believe so it gives time to possibly liquidate FDs to derisk from macro catalysts.
3) I believe they missed their EPS in Q3 due to increased marketing costs so might need to look at their previous financial statement to see if it was one time costs or just more manpower.
Additional Research Needed
I’ve been seeing TOST in more restaurants, too. The restaurants I’m seeing it in are not big chains (I don’t typically visit big chain restaurants so I’m not able to chime in on TOST adoption rates at them). An observation I see but had not considered before are staff time savings. Once you’re ready to pay the bill the wait staff will leave the device at your table to review the bill then enter your credit card.
In restaurants that don’t use TOST or similar system then the wait staff typically prints the receipt; drops it off for customer review / acceptance; returns to pick up the customer’s credit card; returns to the POS to swipe the card; return the receipt and credit card to the customer.
TOST eliminates many of these steps. Wait staff gains greater capacity to focus on other customer value add activities.
I’ve not determined yet if TOST provides a faster settlement of funds. If they do facilitate a faster settlement of funds then this would be highly advantageous.
I’m in the Midwest and have seen this product at several restaurants. SI data looks intriguing but staying away from ER plays for the time being, unfortunately with timing of ER and activity in the rest of the market I’m probably going to watch this one from the sidelines and possibly grab some calls if the market is dovish coming out of things Wednesday
Bearish things that come to mind for TOST for me. This is not necessarily about this upcoming ER bc I don’t follow this company closely, but just overall for the company
Ultimately it all comes down to the characteristics of the customer base that they’re selling into…
Restaurants have shit margins already - how many of them can justify paying for this kind of tech? Even if they can pay for the POS solution, can they justify spending on all the other things that TOST offers?
I imagine TOST tries to differentiate and build a moat by telling this platform story, where they cover things beyond just POS, such as marketing and other business services. On marketing in particular, my guess is that most restaurants treat delivery platforms as their marketing arm? Idk why they would pay TOST to do marketing. If TOST can’t get beyond just the POS solution, then that’s a pretty crowded space between clover, square, etc.
The highly competitive/commoditized nature of POS is already bad enough, then you layer on the fact that a good number of restaurants close within 1 year of operating, aka TOST’s customer base is constantly going out of business. All this means that TOST needs to constantly plow marketing and sales resources into either getting net-new revenue, or filling the hole created by customers switching or going out of business. Looks like operating losses were a big concern from last earnings - I don’t see that changing
Shares of Toast Inc. TOST, +2.48% fell more than 11% in the extended session Tuesday after the restaurant-focused payments company reported a mixed quarter, showing a wider per-share loss in the fourth quarter than Wall Street expected but higher revenue. Toast said it earned $2 million, swinging from a net loss of $61 million in the fourth quarter of 2020. That resulted in a diluted per-share loss of 23 cents a share, compared with a loss of 31 cents a share in the year-ago quarter. Sales rose 111% to $512 million, Toast said. FactSet consensus called for an adjusted loss of 12 cents a share on sales of $488 million in the quarter. “The restaurant industry was tested again in 2021, but as evidenced by our growth there is tremendous demand for the Toast platform as restaurant operators navigate the new normal,” Chief Executive Chris Comparato said in a statement. Toast guided for first-quarter revenue between $469 million and $499 million, and an adjusted loss between $65 million and $55 million. The analysts surveyed by FactSet call for first-quarter sales of $477 million. Toast became a public company in September.
Regardless the stock is dumping afterhours and is not recovering. If this becomes a post-ER downward trend, we can ride the trend down just based on “Phase 3” of the ER play, and if the share unlock is true, then that just adds even more downside pressure. Win win?
agreed here. If what there is no recovery here , I dont think Tost spent alot of time consolidating under 23 and with macro conditions present I would buy some puts. I dont see much positive catalysts in the future. Will be watching this and may pick up some puts.
