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Is Toast (TOST) A Great Long-Term Buy?

·3 min read

Baron Funds, an asset management firm, published its “Baron Opportunity Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. A decline of 2.03% was delivered by the fund’s institutional shares for the third quarter of 2021. For the period, the Fund trailed the Russell 3000 Growth Index, which rose 0.69%, and the S&P 500 Index, which increased 0.58%. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Baron Opportunity Fund, in its Q3 2021 investor letter, mentioned Toast, Inc. (NYSE: TOST) and discussed its stance on the firm. Toast, Inc. is a Boston, Massachusetts-based cloud-based restaurant software company with a $20.3 billion market capitalization. TOST delivered a 13.14% return for the past five days and it closed at $40.38 per share on December 08, 2021.

Here is what Baron Opportunity Fund has to say about Toast, Inc. in its Q3 2021 investor letter:

"Toast, Inc. is a cloud-based end-to-end technology platform purpose-built for the restaurant industry. Its platform provides a comprehensive suite of cloud software products and financial technology solutions to its customers to connect front-of-house with back-of-house operations across all customer channels. Toast’s core module is its point-of-sale software solution and requires all customers to use Toast as their payment processor. Customers then have the option to bundle or add-on additional modules across operations, digital ordering and delivery, marketing and loyalty, team management, and back office. Toast today powers 48,000 restaurants within the 860,000 U.S. restaurant industry, largely focusing on small- and medium-sized (“SMB”) restaurant customers (generally fewer than 10 locations but up to 50), with some larger enterprise customers as well. Toast is the clear market leader in SMB restaurant technology with the best product offering and only full, end-to-end platform. We believe that as restaurants continue to invest in technology at an accelerated pace emerging from COVID, Toast will be a big beneficiary given its leading market position and best-in-class product. At less than 6% penetration of U.S. restaurants and 3% penetration of its $15 billion recurring-revenue TAM, Toast has a long runway for growth by signing on additional locations to the platform and increasing the attach rate of its value-add modules. Only 54% of customers today use 4 or more of Toast’s 10-plus modules, each of which provide significant value to the customer and would drive Toast’s recurring revenue stream higher."

chips, junkfood
chips, junkfood

Photo by Phillip Goldsberry on Unsplash

Based on our calculations, Toast, Inc. (NYSE: TOST) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. TOST was in 38 hedge fund portfolios at the end of the third quarter of 2021, compared to 0 funds in the previous quarter. Toast, Inc. (NYSE: TOST) delivered a -16.50% return for the past month.

Disclosure: None. This article is originally published at Insider Monkey.