Money & Markets Week Ahead for the week of September 20, 2021: I highlight the Toast Inc. IPO as in-person dining at restaurants ramps up.
I also look into the state of the housing market with a preview of an important home builder’s survey.
Toast IPO Preview
The initial public offering (IPO) market is active again, with many new offerings set to price in the coming days.
I want to highlight the Toast IPO. Toast is a cloud-based, end-to-end technology platform that helps restaurants with daily operations.
The Boston-based company is expected to price its IPO on Thursday. It will list on the New York Stock Exchange under the symbol TOST.
What it is: Toast offers a suite of software as a service (SaaS) and financial technology products, including payment processing, to restaurants.
As of June 30, 2021, Toast served nearly 29,000 clients encompassing more than 48,000 restaurant locations, according to its S-1 filing. For the 12 months ending on June 30, the company processed more than $38 billion of gross payment volume. That helped it secure $1.2 billion in revenue over that same time period.
The IPO: Toast plans to raise $685 million with its IPO. It will offer 21.7 million shares at a price range of $30 to $33 to achieve that goal. At the midpoint of that range, Toast’s market value would sit at $17.9 billion, according to Renaissance Capital.
Goldman Sachs, J.P. Morgan, KeyBanc Capital Markets, Morgan Stanley, Piper Sandler and William Blair are bookrunners on the deal.
The skinny: The Toast IPO has a few things going for it. It’s a cloud-based software and fintech company, and if the recent trend of investing in growing tech stocks holds up, that’s a great sign for TOST. Check out a recent edition of Investing With Charles here for more analysis of the broader fintech market.
It is also going public in the midst of a great economic recovery in America. Many restaurants were forced to close their doors throughout the last year, but locations are opening again. Toast’s suite of products actually helped many of its clients shift their business model amid the pandemic, according to its S-1 filing.
If Toast can grow its customer base as the economy recovers, it could set itself up well for the future.
Data Dump: U.S. Building Permits
Earlier this year, it looked like the U.S. housing market was on its way to another bubble like we experienced in the late 2000s. The combination of low interest rates and COVID-related exodus out of cities was pushing prices up everywhere.
A key indicator of the state of the housing market is the monthly Building Permits Survey from the United States Census Bureau, which will publish August results on Tuesday.
This survey notes the number of new building permits, housing starts and housing completions month-to-month.
After spiking as high as 1.8 million new permits issued by the government in February 2021, total monthly permits sank lower throughout the summer.
But demand is still elevated compared to a year ago. Just over 1.6 million new building permits for privately-owned housing units were issued in July. That’s 6% higher than July 2020, which marked the beginning of the housing recovery out of the COVID-19 pandemic.
The skinny: The housing market has cooled a bit after surging higher through late 2020 and early 2021. Builders are facing some major headwinds on the cost and supply front, and that equates to fewer houses being completed.
With fewer new homes on the market, demand and prices for existing homes should remain elevated. That could lead to more consumers opting to rent, pushing rents higher and affecting overall consumer prices.
To finish off the Money & Markets Week Ahead, here’s a look at some of the key earnings reports due out this week:
Lennar Corp. (NYSE: LEN)
Adobe Systems Inc. (Nasdaq: ADBE)
FedEx Corp. (NYSE: FDX)
AutoZone Inc. (NYSE: AZO)
Aurora Cannabis Inc. (Nasdaq: ACB)
General Mills Inc. (NYSE: GIS)
BlackBerry Ltd. (NYSE: BB)
KB Home (NYSE: KBH)
Nike Inc. (NYSE: NKE)
Costco Wholesale Corp. (Nasdaq: COST)
Vail Resorts Inc. (NYSE: MTN)
9F Inc. (Nasdaq: JFU)
Assistant Managing Editor, Money & Markets
P.S. Adam O’Dell will release details of his new Wednesday Windfalls strategy live on September 23. During the live event, he’ll show you how a simple two-day trade has beaten the market by 51 times over the last six months. To sign up for the live event, click here.