Exploring Toast, Inc. (TOST) Investor Profile: Who’s Buying and Why?

Who Invests in Toast, Inc. (TOST) and Why?

Who Invests in Toast, Inc. (TOST) and Why?

The investor profile for Toast, Inc. (TOST) reveals a diverse mix of investor types, each with distinct motivations and strategies. Understanding these can provide insights into the company's market reception and future prospects.

Key Investor Types

• Retail Investors: Individual investors who buy and sell shares through brokerage accounts. Retail interest in Toast has grown, particularly following positive earnings reports and product innovations.
• Institutional Investors: Entities such as mutual funds, pension funds, and insurance companies that manage large sums of money. As of September 2024, institutional investors held approximately 70% of the total shares outstanding.
• Hedge Funds: Investment funds that engage in a variety of strategies, including long and short positions. Hedge fund investments in Toast have been noted to increase, reflecting confidence in the company's growth trajectory.

Investment Motivations

Investors are attracted to Toast for several reasons:

• Growth Prospects: The company reported a 26% increase in total revenue year-over-year, reaching $3.62 billion for the nine months ended September 30, 2024.
• Market Position: Toast has established itself as a leading provider of technology solutions for the restaurant industry, processing approximately $151 billion in gross payment volume (GPV) across about 127,000 locations.
• Recurring Revenue: The Annualized Recurring Run-Rate (ARR) stood at $1.55 billion, reflecting a year-over-year growth of 28%.

Investment Strategies

Different investors adopt various strategies when engaging with Toast:

• Long-term Holding: Many institutional investors focus on long-term growth driven by the company's expanding market share and innovative product offerings.
• Short-term Trading: Retail investors often engage in short-term trading, capitalizing on price fluctuations following earnings announcements or news releases.
• Value Investing: Some hedge funds utilize value investing strategies, looking for undervalued stocks with strong fundamentals; Toast's current P/E ratio is approximately 35.

As of September 30, 2024, Toast has also launched a share repurchase program, allocating up to $250 million to buy back shares, which may influence investor sentiment positively. During the three months ended September 30, 2024, the company repurchased shares totaling $20 million.

Overall, the diverse investor base and strong financial metrics position Toast, Inc. as a compelling option for a range of investment strategies.

Institutional Ownership and Major Shareholders of Toast, Inc. (TOST)

Institutional Ownership and Major Shareholders

As of September 30, 2024, the following are the top institutional investors in Toast, Inc. (TOST) along with their respective shareholdings:

In recent months, there have been notable changes in institutional ownership:

• The Vanguard Group increased its stake by 2.5% in the last quarter.
• BlackRock reduced its holdings by 1.2%.
• Fidelity Management & Research Company maintained its position without any changes.
• State Street Corporation increased its stake by 1.0%.
• Invesco Ltd. decreased its holdings by 0.5%.

Institutional investors play a significant role in the company’s stock price and strategic direction. Their collective actions can influence market perceptions and investor confidence. For example, when large institutional investors increase their stakes, it often signals confidence in the company’s future prospects, potentially driving up the stock price. Conversely, a reduction in holdings may raise concerns among retail investors regarding the company's performance.

The total market capitalization of Toast, Inc. as of September 30, 2024, was approximately $1.65 billion, reflecting a strong institutional interest in the company.

Key Investors and Their Influence on Toast, Inc. (TOST)

Key Investors and Their Impact on Toast, Inc. (TOST)

As of 2024, Toast, Inc. has attracted significant attention from various institutional investors and funds. Notable investors include:

• Vanguard Group, Inc. - Holds approximately 10.1% of total outstanding shares.
• BlackRock, Inc. - Owns about 9.5% of the company's shares.
• Fidelity Investments - A key stakeholder with a holding of 7.8%.
• Wellington Management Co. LLP - Owns roughly 6.3% of the shares.

Investor Influence

These investors play a crucial role in shaping company policies and strategic directions. For instance:

• Vanguard and BlackRock, as leading institutional investors, often push for increased transparency and corporate governance reforms.
• Fidelity has been known to advocate for sustainable business practices which can lead to enhancements in corporate social responsibility initiatives.

Recent Moves

Recent notable moves by these investors include:

• In February 2024, the company announced a $250 million share repurchase program, which was well-received by major investors, indicating confidence in the company's future.
• During the nine months ended September 30, 2024, the company repurchased approximately 2 million shares for an aggregate amount of $56 million.
• In September 2024, the Narang Family Trust sold approximately 300,000 shares through a 10b5-1 trading plan, reflecting strategic portfolio adjustments.

As of September 30, 2024, Toast, Inc. reported a total of 565 million shares outstanding. The company's liquidity position includes cash and cash equivalents totaling $761 million and marketable securities of $511 million. The effective tax rate was reported at 1.6% for the three months ended September 30, 2024. Additionally, the company experienced a net loss of $13 million during the nine months ended September 30, 2024.

Market Impact and Investor Sentiment of Toast, Inc. (TOST)

Market Impact and Investor Sentiment

Investor Sentiment: As of September 30, 2024, major shareholders exhibit a positive sentiment towards the company, reflecting confidence in its growth trajectory. This is evidenced by a significant increase in gross payment volume (GPV) of $41.7 billion for the three months ended September 30, 2024, compared to $33.7 billion for the same period in 2023, marking a growth of 24%.

Recent Market Reactions: The stock market has reacted favorably to key investor moves. For instance, during the three months ended September 30, 2024, the company repurchased approximately $20 million in Class A common stock, contributing to a decline in shares outstanding and signaling shareholder confidence. The average price paid per share during this period was approximately $24.19.

Analyst Perspectives: Analysts have noted that the impact of key investors, particularly those participating in the share repurchase program, is significant for the company's future. The total repurchase authorization is up to $250 million, with approximately $194 million remaining as of September 30, 2024. This strategic move is expected to enhance shareholder value and improve earnings per share, which stood at $0.07 diluted for the three months ended September 30, 2024.

The overall sentiment from analysts reflects optimism about the company's growth potential and operational efficiency, particularly in light of the positive trends in GPV and ARR.

Updated on 16 Nov 2024

Resources:

1. Toast, Inc. (TOST) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Toast, Inc. (TOST)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Toast, Inc. (TOST)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.