The tradition of last year’s hot initial public offerings falling hard in 2022 has continued. Electric vehicle producer Rivian (NASDAQ:RIVN) shocked markets when it began in trading in November. Now it is primed to finish January below its debut price. This week we’ve seen another company that made a splash slide deep into the red. Food service software producer Toast (NYSE:TOST) delighted investors when it began trading. Today, an analyst issued a report that has sent TOST stock plunging. While market momentum has been negative of late, there are other forces at play in this case.
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What’s Happening With TOST Stock
Today, Mizuho Financial Group lowered its price target on TOST stock from $43 to $24. Analyst Dan Dolev also reiterated a “hold” rating. KeyBanc analyst Josh Beck also issued a low price target of $30, though he still rates the stock as a “buy.”
TOST stock has not reacted well to the downgrade. Shares closed down 8% today, leaving its losses over the last month at 46%. For a stock that was trading at $59 in early November, declines of this magnitude are highly discouraging.
Why It Matters
Since its early November peak, Toast has been slipping gradually, revealing its lack of staying power in a turbulent market. More than anything, this should be viewed as an example of what can happen when a company is not prepared for shifting industry tides.
Following its October IPO, InvestorPlace contributor Will Ashworth laid out plenty of reasons to buy TOST stock. Three months later, so much has changed.
The omicron variant has led to many problems for the restaurant industry, causing customers to turn away from indoor dining. With outdoor dining weather still months away for much of the country, restaurants face a grim outlook. As a result, Toast’s customer base has diminished as restaurants look for ways to reduce costs.
Recent market trends haven’t been kind to the food service industry. Stocks such as Chipotle (NYSE:CMG) and Yum! Brands (NYSE:YUM) are down today and have been struggling since the year began. In December 2021, InvestorPlace contributor Muslim Farooque speculated that the pending acquisition of Del Taco (NASDAQ:TACO) by Jack in the Box (NASDAQ:JACK) was likely to boost restaurant stocks. In the month since, we’ve seen the opposite transpire.
What It Means for Toast
With this in mind, it’s not surprising that TOST stock price predictions would be low. The problem with a product specific to one industry is that if that industry suffers, there is little to drive sales.
Downgrades of this sort are quick to push stocks down, especially in the face of negative market momentum. Unless something drastic changes, the future looks bleak for Toast.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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