Investors Burned by Toast's Fourth-Quarter Results, With Margin Pressure Taking Center Stage

Toast shares tumbled roughly 20% in intraday trading after the company missed the Street’s profitability estimates for its fourth quarter. Our take on results is less than sanguine—we anticipate lowering our $25.50 fair value estimate by a midteens percentage on soft margin guidance—but it is a bit more optimistic than the market’s reaction, given our already frosty view of the restaurant industry's near-term prospects. We also plan to move our Morningstar Uncertainty Rating to Very High from High, consistent with our quantitative methodology.