The Resilience of the Hospitality Industry: Two Tech Stocks Leading the Way

Spread the love

In a world where the travel industry is constantly evolving and adapting to new challenges, the hospitality sector remains a stronghold. Despite recent concerns about the post-pandemic travel boom normalizing, two companies in the dining and hospitality realm, Agilisys and Toast Inc., are steadfast in their belief that the industry’s demand continues to thrive. This article delves into the success stories of these two companies and explores why they are worth considering for your investment portfolio.

Agilisys: Powering Hospitality Innovation

Meet Agilisys

Agilisys is a prominent player in the hospitality industry, offering a range of hardware and software solutions. Their product lineup includes point-of-sale (POS) systems, property management tools, inventory management, and reservation management systems. Agilisys caters to a diverse clientele, including hotels, restaurants, casinos, cruise ships, resorts, food service management, and stadiums. Their impressive client list features renowned industry giants such as Marriott International Inc., Hilton Worldwide Holdings Inc., and Caesars Entertainment Inc.

Thriving in the New Normal

Despite industry challenges, Agilisys remains on an upward trajectory. In the latest quarter, the company welcomed 17 new customers, with an impressive 76% of them opting for full subscription agreements. Agilisys aims to continue this growth trend by acquiring 15 to 20 new customers each quarter. Furthermore, the addition of 87 new properties that were previously untouched by their products is a testament to their expanding reach. Notably, these new properties have reported a 25% higher average deal size compared to previous quarters.

Financial Success

In fiscal Q2 2024, Agilisys exceeded expectations with profits of 25 cents per share, outperforming analyst estimates by six cents. Their revenues also saw a substantial increase, surging by 22.8% YoY to reach $58.62 million, surpassing the consensus analyst estimate of $56.8 million. While the gross margin did experience a slight dip compared to the previous year, ending at 59.9%, Agilisys finished the quarter with a robust cash reserve of $112.8 million.

A Positive Outlook

Agilisys CEO Ramesh Srinivasan expressed confidence in the company’s future, stating, “Given the successful investments in product innovation during the past few years, we think our ability to fulfill the growing hospitality industry need for quantum technology improvements to improve operational efficiencies, staff, and guest experiences will help keep up and build on our current business momentum. We remain bullish and confident of our short, medium, and long-term prospects.”

Raising the Bar

With their eyes set on an even brighter future, Agilisys raised their fiscal full year 2024 revenue guidance to $235 million to $238 million, up from the previous estimate of $230 million to $235 million, and surpassing the consensus analyst estimate of $233.69 million.

Toast Inc.: Transforming the Restaurant Industry

Introducing Toast

Toast Inc. is a comprehensive restaurant ecosystem management software provider. They offer both hardware and software solutions on a subscription and add-on basis. Their feature-rich POS system is designed to cater to a wide range of dining establishments, from Michelin-starred restaurants to local pizzerias. In addition, Toast enables customers to implement loyalty programs, track points, and offer rewards. Their all-in-one system seamlessly integrates online ordering, tracking, inventory management, reservation systems, payroll processing, and payment processing.

A Growing Network

Toast has gained significant traction in the restaurant industry, with several major restaurant groups adopting their platform. Notable clients include Darden Restaurants Inc., operator of popular chains like Olive Garden and Longhorn Steakhouse, as well as Bloomin’ Brands Inc., the company behind Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, and Fleming’s. Furthermore, Toast secured an agreement with Marriott to service its dining platform across various service types, marking a substantial achievement for the company. Toast’s network has thrived with a 35% YoY location growth, reaching 93,000 locations, with over 7,500 net new additions in Q2 2023.

Impressive Financials

In Q2 2023, Toast reported an EPS loss of 19 cents, surpassing consensus analyst estimates by one cent. Their net loss was $98 million, while adjusted EBITDA reached $15 million. Toast’s revenues also surged, with a 44.9% YoY increase to $978 million, exceeding consensus estimates of $943.06 million. The company’s annual run rate (ARR) climbed by 45% YoY, reaching $1.1 billion, and gross payment volume (GPV) rose by 38% to $32.1 billion. Remarkably, Toast achieved positive adjusted EBITDA for the first time since its IPO in Q2 2023.

Positive Projections

Toast has raised its Q3 2023 revenue estimates to $1.01 billion to $1.04 billion, surpassing the $1 billion consensus analyst estimate. The expected adjusted EBITDA for the same period ranges from $15 million to $25 million. Full-year 2023 revenues are projected to be between $3.81 billion and $3.87 billion, an improvement from the initial estimate of $3.77 billion. The adjusted EBITDA is expected to range between $15 million and $35 million, marking a significant positive shift from the previous guidance of negative $10 million to $10 million.

New Leadership

Toast announced on September 5, 2023, that Aman Narang will assume the role of CEO, effective January 1, 2024. Narang, who has served as Co-President since December 2012 and Chief Operating Officer since June 2021, will lead the company. The current CEO, Chris Comparato, will continue to serve on the Board of Directors.

Analyst Perspectives

Various analysts have weighed in on the performance of Agilisys and Toast:

On September 6, 2023, UBS raised its rating for Toast to Buy with a $30 price target.
On October 2, 2023, Mizuho lowered its price target to Neutral, reducing it to $16 from $30. This change was attributed to the growth in GLP-1 weight loss drug utilization impacting restaurant dining and desserts.
On October 20, 2023, UBS resumed coverage with a Buy rating and a $24 target. Conclusion

As the hospitality and restaurant industries continue to navigate through evolving market dynamics, Agilisys and Toast Inc. stand out as beacons of resilience and growth. Agilisys’ consistent expansion and financial success, combined with Toast’s impressive growth and positive financial projections, make them noteworthy contenders for investors seeking opportunities in these sectors. While both companies are currently performing well, it’s essential to conduct thorough research and consider the latest updates before making investment decisions.

For more investment insights and top-rated stock recommendations, visit gnews24x7.

_Disclaimer: The information provided is for informational purposes only and does not constitute investment advice. Please conduct thorough research and consider the latest updates before making investment decisions._