Toast Earnings: Restructuring Efforts Yield Significant Profit Outlook Boost; Shares Fairly Priced

We plan to raise our $19.50 fair value estimate for narrow-moat Toast by a high-teens percentage after the company's first-quarter report, leaving the shares trading in a range we consider fairly valued. While revenue of $1.08 billion was in line with our $1.05 billion projection, the fruits of restructuring far exceeded our expectations. Toast achieved 980 basis points of operating margin improvement to negative 1.4% versus our negative 6% forecast. More importantly, commentary on the call suggested further operating leverage, and with the firm raising its full-year adjusted EBITDA guidance by $50 million at the midpoint, to $250 million-$270 million, we see a clear path to GAAP profitability in 2025 and higher-than-expected equilibrium operating margins.