Toast (TOST) Is Considered a Good Investment by Brokers: Is That True?

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Toast (TOST), and emphasizes the importance of using these recommendations in conjunction with other analytical tools like the Zacks Rank to make informed investment decisions [1][5][11]. Brokerage Recommendations for Toast - Toast has an average brokerage recommendation (ABR) of 1.79, indicating a consensus between Strong Buy and Buy, based on recommendations from 29 brokerage firms [2][5]. - Out of the 29 recommendations, 17 are classified as Strong Buy, accounting for 58.6%, while one is classified as Buy, making up 3.5% of the total recommendations [2]. Limitations of Brokerage Recommendations - Studies indicate that brokerage recommendations have limited success in guiding investors towards stocks with the highest price increase potential [5]. - Analysts from brokerage firms often exhibit a strong positive bias in their ratings due to vested interests, leading to a disproportionate number of Strong Buy recommendations compared to Strong Sell recommendations [6][11]. Zacks Rank as an Alternative - The Zacks Rank, which categorizes stocks from 1 (Strong Buy) to 5 (Strong Sell), is presented as a more reliable indicator of a stock's near-term price performance, driven by earnings estimate revisions [8][12]. - The Zacks Rank is updated more frequently than the ABR, reflecting timely changes in earnings estimates and business trends [13]. Current Earnings Estimates for Toast - The Zacks Consensus Estimate for Toast's current year earnings remains unchanged at $1.04, suggesting stability in analysts' views regarding the company's earnings prospects [14]. - Due to the unchanged consensus estimate and other factors, Toast currently holds a Zacks Rank of 3 (Hold), indicating a cautious approach despite the Buy-equivalent ABR [15].