HomeBusiness2 stocks down 60% and 65% to buy now

2 stocks down 60% and 65% to buy now

The ongoing bull market may now be official, but that doesn’t mean there aren’t still plenty of bargains to be had among stocks. After the tech stock crash of 2022, many promising names are still down sharply from their 2021 peaks, presenting opportunities as investors shake off recession concerns and interest rates are expected to fall later this year.

If you’re looking for stocks trading at a discount, read on as two Motley Fool contributors provide information on two tech companies — Toast (NYSE: TOST) And Pinterest (NYSE: PINS) — which now look like theft.

A bull statue looking at a stock chart

Image source: Getty Images.

How Toast is redefining restaurant management software

Anders Bylund (toast): I don’t always order food from local restaurants. But when I do, I often come across the Toast logo.

The restaurant management software specialist has left a strong mark on the foodservice industry in Tampa Bay, where I live (and across the country as well). The company’s preferred marketing method is to select a few hotspots at a time, send out a swarm of salespeople and people with product demonstrations, and enjoy powerful word-of-mouth advertising when the first few wins in each market lead to satisfied customers to lead.

It seems like an easy sell. Toast’s platform performs many functions under a unified software umbrella, from payment processing, inventory management and menu creation to order taking and data-driven marketing proposals. Most restaurants rely on many different tools from different vendors, while not resorting to spreadsheets or handwritten notes. But at Toast, every part of the system is built to support everything else, so servers can recommend dishes based on an abundance of shrimp and garlic, and the manager can tailor social media posts or mailer ads to the most popular sandwich in each neighborhood . .

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Additionally, the company sells hardware, such as credit card readers and order-taking tablets, below cost, giving cash-strapped startups another good reason to try this solution. In this way, the hardware line acts as an additional marketing tool.

Overall, Toast calls this strategy a “local go-to-market approach,” centered around “flywheel markets” with a greater than 20% share of the local small and medium restaurant sector. It is an effective approach. The company added 6,500 new customer locations in the fourth quarter of 2023, representing a 34% gain compared to the same period a year ago.

Toast expands in several dimensions at the same time.

  • The company signed larger chains in the past year, such as Caribou Coffee, Romano’s Macaroni Grill and Jersey Mike’s Subs, signaling its ambition to also serve larger customers.

  • Toast’s annual research and development (R&D) budget has increased 160% over the past year and a half, supported by a 226% increase in revenue. Recent product introductions include catering services, mobile apps for managing the entire restaurant system, and support for selling retail merchandise (think T-shirts and wine bottles) in addition to the foodservice experience. A broader feature catalog should result in higher revenue per customer over time.

  • The localized go-to-market idea also goes abroad. Toast has so far made small attempts to reach parts of Canada, Ireland and Britain, aiming for a global footprint many years later.

Despite this ambitious and successful growth strategy, many investors have focused on missteps such as the unwanted introduction of payment processing fees last fall. Others avoid the stock due to its lack of earnings. But no one said winning was cheap. Toast combines the cost-saving powers of word-of-mouth with the higher-end hardware strategy.

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And the result is a fantastic growth company that is still in the early days of a long-term expansion strategy. Toast appears to have already dropped Tampa from its list of “flywheel markets,” bringing both newer names and old favorites onto that message-boosting customer list. Feel free to ignore this anecdotal success story, but keep an eye on the Toast brand wherever you are.

So the stock is trading more than 20% below its 52-week high and 65% lower than it was in its first few weeks on the market – coincidentally right at the start of 2021’s inflation panic.

With the share price significantly below peak levels, Toast offers high-quality investment potential at a discount. This is pretty much the only stock I would consider buying in the restaurant-related sector right now.

Pinterest is coming back

Jeremy Bowman (Pinterest): Like other social media stocks, Pinterest has been a big winner during the pandemic. With much of the world stuck at home, users flocked to the app and website to get information on everything from cooking to kids’ activities to home renovation tips.

However, with the economic reopening, users returned to outdoor activities, and the user base declined for several quarters. Now that trend seems to be passing. User growth has returned. Revenue growth is accelerating and advertisers are looking to spend again after cutting spending in 2022 and 2023 on recession fears.

Pinterest shares sold off in its fourth-quarter earnings report, but results were solid. Monthly active users increased 11% to 498 million, with growth in all three regions. Revenue rose 12% to $981 million, and reported a net profit of $201 million (Generally Accepted Accounting Principles (GAAP)), showing that the company can be highly profitable as it grows. The fourth quarter is seasonally the strongest quarter of the year and the company reported a slight net loss for the year, but on both the top and bottom lines the company is moving in the right direction. The company expects first-quarter revenue growth to accelerate to 15% to 17% year-over-year, with only 9% to 13% growth in non-GAAP operating expenses, indicating solid margin expansion.

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Pinterest is a unique feature on social media because the platform focuses on self-improvement rather than social connection, and its users tend to see ads because they are often looking for products related to fashion, adventure, or whatever their area of ​​interest.

With demand for digital advertising recovering and Pinterest’s margins expanding, now seems like a good time to grab shares in the stock, down 60% from their 2021 high.

Should you invest €1,000 in Pinterest now?

Consider the following before buying shares on Pinterest:

The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Pinterest wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.

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*Stock Advisor returns February 26, 2024

Anders Bylund has no position in any of the stocks mentioned. Jeremy Bowman has positions on Pinterest. The Motley Fool holds positions in and recommends Pinterest and Toast. The Motley Fool has a disclosure policy.

2 Stocks Down 60% and 65% to Buy Now was originally published by The Motley Fool

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