Options Traders Enjoyed the Taste of Toast Stock's Rally

Our Weekend Treaders subscribers doubled their money with this trade

Digital Content Manager
Mar 5, 2024 at 12:38 PM
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Schaeffer's Weekend Trader subscribers are already seeing profits in March. In fact, they saw a 100% gain in just one week with our Toast Inc (NYSE:TOST) April 20 call recommendation. Below, we will further explore how our traders knew this would be a winning play.

At the time of our recommendation on Friday, Feb. 25, the shares were trading above the $20 region, which was half their initial public offering (IPO) price of $40 back in 2021. Toast stock had also gapped to multi-month highs after its quarterly earnings report, and the $20.71 region was close to twice its mid-November closing low.

Analysts were still mostly pessimistic on TOST, with 12 of the 22 in coverage sporting a tepid "hold" or worse rating. Sentiment had improved in the two months prior, however, indicating a continued shift from pessimism could generate tailwinds for Toast stock.
 
Short interest was also up 22% since mid-November -- despite shares rallying roughly 50% in that timeframe. The 33.41 million shares sold short made up 9% of the equity's available float, suggesting there was also opportunity for a short squeeze to push it higher.
 
Brokerage firms started taking on a more bullish stance immediately after we initiated our long position. In fact, Jefferies raised its price target on TOST to $24 from $21 on Monday, Feb. 26. Then yesterday, Evercore initiated coverage with an "outperform" rating and $22 price target, sending the shares to their highest level since July 19.
 
Short interest began rapidly unwinding, too, down 6.3% in the last reporting period and now making up just over 8% of TOST'S available float. While the security is down 3.4% to trade at $23.54 at last check, it's no sweat off our investors' backs, who doubled their money yesterday when they closed their positions.

 

TOST PM

 

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