The post-pandemic pent-up demand generated travel boom may be starting to normalize based on recent data from the airlines. Airlines have cut forecasts but insist demand is still there. When it comes to the travel and leisure sector, dining and hospitality also see elevated activity levels. So, it only makes sense that dining and hospitality face a slowdown if the lead category sees softness. However, two companies at the pulse of the dining and hospitality industry insist that demand is still going strong. To get a better insight into the bull case, investors should look at these two stocks.
Agilisys provides hospitality hardware and software products and services, including point of sales (POS), property management, inventory, and reservation management systems. It caters to hotels, restaurants, casinos, cruise ships, resorts, food service management and stadiums. Its products are used by leading industry brands, including Marriott International Inc. NYSE: MAR, Hilton Worldwide Holdings Inc. NYSE: HLT and Caesars Entertainment Inc. NSE: CZR. The company added 17 new customers in the latest quarter, of which 76% were fully subscription agreements. The company aims for 15 to 20 new customers per quarter. The company added 87 new properties, which had no products before, while the parent companies were clients. The average deal size per property was 25% higher than in previous quarters. New properties were full or partially subscription-based.
The party continues
Agilisys reported fiscal Q2 2024 profits of 25 cents per share, beating analyst estimates by six cents. Revenues climbed 22.8% YoY to $58.62 million, beating $56.8 million consensus analyst estimates. Net income was $4.1 million or 16 cents per diluted share. Recurring revenue comprised of subscription and maintenance charges was $34.2 million, comprising 58.4% of net revenues. Subscription revenues rose 29.1% YoY, comprising 53.6% of recurring revenues. Gross margin slipped to 59.9% compared to 61.5% in the year-ago period. The company ended the quarter with $112.8 million in cash.
Agilisys CEO Ramesh Srinivasan commented, "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
Agilisys raised fiscal full year 2024 revenue guidance of $235 million to $238 million, up from $230 million to $235 million versus $233.69 million consensus analyst estimates.
Agilisys analyst ratings and price targets are at MarketBeat. Agilisys peers and competitor stocks can be found with the MarketBeat stock screener.
Daily Descending Triangle Breakout
The daily candlestick chart for AGYS had a descending triangle pattern heading into its earnings report. The descending upper trendline resistance kept a lid on bounces as shares initially broke through on a spike to $73 but fell back into the range to slip under the flat-bottom trendline at $64.61. The earnings reaction was a monster gap exceeding 20%, causing shares to gap through the descending trendline and rally from $72.05 to a peak of $83.49. This triggered a daily market structure low (MSL) trigger at $80.97. The daily relative strength index (RSI) surged higher to the overbought 70-band. Pullback support levels are $74.85, $72.05, $68.92 and $67.66.
Toast is a provider of complete restaurant ecosystem management software. It sells both hardware and software on a subscription and add-on basis. Its POS system has everything you need to operate a restaurant, from Michelin stars to the local mom-and-pop pizza joint. It also enables customers to offer loyalty programs that keep track of points and rewards. Online ordering, tracking, inventory, reservation, payroll and payment processing are integrated into a single system.
Platform adoption by big brands
The Toast platform has been adopted by some of the largest restaurant groups in the country, including Darden Restaurants Inc. NYSE: DRI, which operates Olive Garden, Eddie V's, Longhorn Steakhouse, Yard House and Seasons 52 restaurants. In June 2023, Toast came to an agreement with Marriott to service its dining platform for full service, quick service and self-service ordering. The company is thriving with 35% YoY location growth to 93,000, with over 7,500 net new additions in Q2 2023.
Firing on all cylinders
On August 8, 2023, Toast reported a Q2 2023 EPS loss of 19 cents, beating consensus analyst estimates for 20 cents by one cent. Net loss was $98 million, while adjusted EBITDA was $15 million. Revenues rose 44.9% YoY to $978 million, beating consensus estimates of $943.06 million. Annual run rate (ARR) was up 45% YoY to $1.1 billion. Gross payment volume (GPV) rose 38$ to $32.1 billion. The company achieved positive adjusted EBITDA for the first time since its IPO in Q2 2023.
Raising Estimates
Toast raised its Q3 2023 revenue estimates to $1.01 billion to $1.04 billion versus $1 billion consensus analyst estimates. Adjusted EBITDA is expected between $15 million to $25 million. Full-year 2023 revenues are expected between $3.81 to $3.87 billion versus $3.77 billion. Adjusted EBITDA is expected between $15 million to $35 million, up from negative $10 million to $10 million previous guidance.
New CEO
On September 5, 2023, Toast announced that Aman Narang will take over as the new CEO, effective January 1, 2024. Narang has served as Co-President since December 2012 and Chief Operating Officer since June 2021. The current CEO, Chris Comparato, will remain on the Board of Directors.
Analyst Actions
On September 6, 2023, UBS raised its rating for TOST to Buy with a $30 price target. On October 2, 2023, Mizuho cut its target to Neutral, lowering its price target to $16 from $30. The analyst cited the growth in GLP-1 weight loss drug utilization as harming restaurant dining and desserts. On October 20, 2023, UBS resumed coverage with a Buy rating and a $24 target.
Toast analyst ratings and price targets are at MarketBeat.
Daily Inverse Cup and Rounding Top
The daily candlestick chart on TOST indicates a rounding top pattern at the lip line at $15.77. The lip line started on March 24, 2023, as shares rose to $27.00 on July 18, 2023. TOST has steadily returned to retest the lip line, completing the daily inverse pup on the rounding top. The daily MSL trigger is at $16.60. The daily RSI is sinking towards the 30-band. Pullback support levels are at $14.66, $13.66, $12.84 and $11.47.
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