Toast (TOST) remains ideally positioned for positive estimate revisions, driven by improving profitability and market share, while Lightspeed (LSPD) could show evidence of software revenue growth acceleration and margin expansion, setting the stage for a re-rating, Morgan Stanley said in a Q3 earnings preview of the sector on Tuesday.

"Consistent outperformance, durability of net location addition growth, and continued momentum around profitability improvements all support the manifestation of our $50 Toast bull case," according to the note.

The investment firm said that factors like expanding product offerings and favorable pricing are driving growth for Toast, and the company is expected to exceed current estimates.

Morgan Stanley said Lightspeed, which reported "solid" fiscal Q1 results, is deemed "a 'show-me' story" as the analysts "need to see steady execution, software revenue growth acceleration, more positive margin revisions, and evidence of market share gains to bolster confidence in the company's market positioning and likelihood of durable, profitable growth."

CCC Intelligent Solutions' (CCCS) Q3 guidance looks "conservative" and although growth in emerging solutions is still delayed, the company's core business remains "robust," Morgan Stanley added.

The firm said that Sabre's (SABR) 2024 guidance remains on track, supported by air booking recovery and share gains, but 2025 targets appear overly optimistic due to concerns that cost savings and growth will offset each other.

BigCommerce (BIGC) has struggled with declining enterprise accounts and underperformed its peers, the firm said. While the new CEO presents an opportunity for improved execution, there's a risk that the leadership change could add further disruption.

Morgan Stanley raised Toast's price target to $33 from $30 and kept the overweight rating.

The firm rates CCC Intelligent Solutions at equal weight with a $14 price target, Sabre at equal weight with a $4 price target, BigCommerce at equal weight with a $14 price target and Lightspeed at equal weight with a $18 price target.

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