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Why Toast Stock Dropped 17.4% on Wednesday

By Travis Hoium – Nov 10, 2021 at 2:13PM

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Investors didn't like what they saw from Toast's first quarterly report as a public company.

What happened 

Shares of restaurant payments company Toast (TOST 2.79%) fell as much as 17.4% in trading on Wednesday after the company reported third-quarter financial results. Shares are still down 14.9% as of 1:30 p.m. EST and are nearing all-time lows for the company that had its initial public offering last week

So what

Revenue for the third quarter of 2021 was $486.4 million, up 105% from a year ago. Gross payment volume increased 123% to $16.5 billion. However, net loss for the quarter grew from $62.6 million a year ago to $252.5 million, or $1.05 per share, and operating cash burn was $17.2 million.

People paying a bill at a restaurant using mobile contactless payment.

Image source: Getty Images.

It's early to be judging Toast by analyst estimates, but they had guessed the company was going to report $430 million in revenue and a $0.25 loss per share, so by that measure results were mixed. 

Now what

This looks very much like traders selling the earnings news, rather than analyzing earnings themselves. Toast is still growing quickly and losses are to be expected as it invests in technology and sales to grow the business. 

I think we need to give Toast some time to mature as a public company to really understand what it's worth. The company's market cap is nearly $27 billion as I'm writing and it's losing money rapidly. Until that changes, I don't see a reason to jump into the stock just yet. 

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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