Outperforming Cloud Stock Has More Room to Run

Toast Inc (NYSE:TOST) stock gapped higher on Nov. 8 after the fintech company’s earnings beat, taking out half its all-time high at $35. The shares have since continued higher, moving above analysts’ 12-month consensus price target of $38.33, the $40 level, which is home to its 2021 initial public offering (IPO) price, and $41 – a 50% retracement of its all-time high and 2022 low.

 

TOST also took out the $42 level last week, home to peak call open interest (OI) at the December series, and moved on to 52-week highs despite a Nov. 20 downgrade. The stock is still trading above the Nov. 19 close despite the bear note, showing underlying technical strength.

 

Despite Toast stock more than doubling in value year to date, only half of the 26 analysts in coverage maintain a “buy” or better rating, and any upgrades could help extend the stock’s recent momentum. Plus, though shorts have been in covering mode since short interest hit all-time highs, it would still take shorts more than six days to cover, at TOST’s average pace of trading.

 

The equity’s implied volatility (IV) sits lower than 97% of readings from the past year, and below its 60-day historical volatility (HV). Our recommended January 17, 2025 call has a leverage ratio of 6.7, and will double on a 14.5% rise in the underlying security.