2. Toast Inc. (NYSE:TOST)
Market Capitalization as of September 13: $14.66 billion
Number of Hedge Fund Holders: 43
Toast Inc. (NYSE:TOST) is a cloud-based restaurant management software company that provides an all-in-one point-of-sale (POS) system built on the Android operating system, helping with inventory management and employee scheduling.
With ~13% market share in US restaurants, the company has a significant opportunity to scale up. It’s also expanding its Total Addressable Market (TAM) into key international markets, enterprise chains, and food and beverage retail. Since launching its digital storefront suite, ~30% of locations have upgraded to the Pro tier, which includes a new website product that enhances their online presence.
In Q2, it achieved a record 8,000 net new locations, resulting in higher productivity and faster market share gains, especially in the top 10 flywheel markets, where the company saw 50% more wins compared to non-flywheel markets.
A notable example is Bizoria, a fast-casual concept in Greater Atlanta, which switched to Toast Inc. (NYSE:TOST) and increased revenue by 25% after integrating the POS terminals with self-ordering kiosks and kitchen display systems.
Overall, this quarter generated a revenue of $1.24 billion, up 26.99% year-over-year. 43 hedge fund holders are long in the company and the highest held stake amounts to $468,347,742 by Durable Capital Partners.
The company focuses on prioritizing enhancing its offerings with products and experiences that resonate with customers. The platform serves all restaurant stakeholders, creating value by supporting new revenue streams and simplifying operations. These factors position the company for growth and make it a top new tech stock to buy now.
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.”
