Is TOST Stock TOAST? 3 Strong Contenders to Invest In

Is TOST Stock TOAST? 3 Strong Contenders to Invest In

Posted On July 27, 2023 11:22 am

With the pandemic firmly in the rearview mirror, Americans have gone above and beyond to compensate for the years spent indoors with out-of-home experiences. This has naturally been accompanied by a lot of eating out and ordering in. Hence, it’s understandable why cloud-based restaurant technology company Toast, Inc. (TOST) took the (retrospectively ill-fated) decision to capitalize on the increased demand by adding a processing fee of $0.99 on all online orders over $10.

However, with persistent inflation that the Fed has been trying to tame for more than a year, consumers who have been cutting back elsewhere to spend on outdoor experiences weren’t too thrilled, to put it mildly.

The fee that went into effect on July 10 applied to consumers directly while bypassing the underlying restaurant, whose patrons hardly know the company that offers fully integrated point-of-sale (POS) systems. Moreover, the restaurants’ reputation, which had to bear the brunt of the unilateral nature of the charges they were cut out of, was being negatively impacted.

The consequent backlash was so prompt and intense that TOST’s management was compelled to reverse its decision. The company’s CEO Chris Comparato said, “We made the wrong decision, and following a careful review, including the additional feedback we received, the fee will be removed from our Toast digital ordering channels.”

However, the company’s attempt to repair and restore long-standing relationships with 85,000 disgruntled restaurant locations and enterprise-level clients to prevent losing them to Shift4 Payments, Inc. (FOUR) and Block, Inc. (SQ) has made it fall out of favor with its shareholders. The news of TOST’s course reversal was greeted by an intraday slump of as much as 11%.

Given that, in the short term, TOST was leaving a lot of money on the table by foregoing fees worth hundreds of millions with a gross margin close to 100%, investors’ drastic market reaction and reassessment is understandable.

Although the stock price has recovered by more than 2% since then, it might not be the end of TOST’s recent troubles. Its shenanigans have attracted the threat of litigation from at least two law firms: J. Klein, Esq. (The Klein Law Firm) and Levi & Korsinsky, LLP.

While it remains to be seen how TOST will emerge from its recent troubles when the dust settles, here are a few alternatives investors could consider to give the unfolding drama a wide berth.

VMware, Inc. (VMW)

VMW provides multi-cloud services for all apps that enable digital with enterprise control. Through its portfolio spanning application modernization, cloud management, cloud infrastructure, networking, security, and anywhere workspaces, the company forms a digital foundation for customers to build, run, manage, connect, and protect their workloads.

On June 29, VMW announced that it is joining forces with AMD, Samsung, and members of the RISC-V Keystone community to simplify the development and operations of confidential computing applications.

For the fiscal first quarter that ended May 5, VMW’s revenue increased by 6.1% year-over-year to come in at $3.28 billion, while its non-GAAP operating income increased by 6.2% year-over-year to $819 million. Consequently, the company’s non-GAAP net income increased by 18.8% and 16.4% year-over-year to $644 million, or $1.49 per share.

Analysts expect VMW’s revenue and EPS for the fiscal second quarter to…

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