When a stock you like scares you off with a significant loss in value, remember Warren Buffett's mandate to be greedy when others are fearful. Of course, tanking stock prices need to be evaluated in context -- they can scream value trap or opportunity.
When they scream opportunity, let go of the fear and dive in. Toast(NYSE: TOST) and Take-Two Interactive(NASDAQ: TTWO) are two amazing stocks to buy while they're down.
A massive opportunity to disrupt the restaurant industry
Jennifer Saibil: Toast is a fantastic, growing company with a massive market opportunity, but the stock is down 67% from the all-time high it reached shortly after going public in 2021.
Toast markets automation software and hardware for the restaurant industry. It offers a large suite of services and multiple tiers targeting all kinds of restaurants, with packages specific to restaurant types like cafes or bakeries as well as general options. Its digital products create a complete restaurant management solution, connecting and tracking all parts of a restaurant's operations. Menu choices get sent straight to the kitchen, invoices go straight to accounting, and payment processing happens directly on the platform.
Revenue increased 35% year over year in Q4 2023 to $1 billion, and Toast added 6,500 locations during the quarter to end the year with 106,000. However, it's still in the early innings, and it has incredible growth prospects as it changes the restaurant space. Toast recently unveiled a new program aimed at enterprise customers, a market that's more lucrative than single locations or small chains. Its technology-centered approach offers insights and data analytics that are particularly useful for large clients that want to scale efficiently.
Toast still isn't profitable on a GAAP basis, but its net loss improved year over year from $99 million to $36 million in the fourth quarter. That may be holding investors back at this point, but Toast stock is up 25% year to date as it continues to demonstrate robust growth despite a tough environment.
Trading with a price-to-sales ratio of 3.2, a cheap valuation for a growing stock with huge potential, now is a great time to buy Toast stock.
Invest in Take-Two before its next big growth phase
Keith Noonan: Take-Two Interactive is a leading publisher of video games, and it's known for hit franchises, including NBA 2K, Red Dead Redemption, and Grand Theft Auto. Of these three major series, Grand Theft Auto (GTA) is by far the biggest and most successful.
The last major release in the franchise, Grand Theft Auto V, actually stands as the most profitable entertainment release of all time. With that kind of performance, it's no wonder investors are eagerly anticipating the next major installment. But lately, it looks like shareholders could be waiting a bit longer than originally expected for the release of GTA VI, and that's caused Take-Two's share price to slip this year.
The stock has fallen about 9% in 2024, and it's down 34% from the all-time high it reached in 2021. But this pullback could actually be a great buying opportunity for long-term investors.
Some recent reports and commentary from Take-Two's management suggest Grand Theft Auto VI's release date might slip past the Q1 2025 window many investors and gamers had anticipated. The prospect shouldn't rattle patient shareholders too much. Whenever GTA VI debuts, it's likely to become an enormous success.
The game is being designed with a decade-long lifespan in mind, and it stands a very good chance of being the most profitable entertainment product released in the next 10 years. For reference, Grand Theft Auto V has sold roughly 195 million copies and generated billions in high-margin revenue through its online mode since releasing in 2013.
Take-Two is on the verge of a powerful new growth phase. Instead of getting caught up in the exact timing of when it will kick off, investors can win by building a position in the stock now.
Should you invest $1,000 in Toast right now?
Before you buy stock in Toast, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Toast wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $544,015!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of May 6, 2024
Jennifer Saibil has no position in any of the stocks mentioned. Keith Noonan has positions in Take-Two Interactive Software. The Motley Fool has positions in and recommends Take-Two Interactive Software and Toast. The Motley Fool has a disclosure policy.
