Key Stats for TOST Stock
- Past week performance: -4.2%
- 52-week range: $22 to $46
- Valuation model target price: $44
- Implied upside: 24.5% over 2.3 years
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A Beat and Raise Quarter the Stock Shrugged Off
Toast (TOST) shares fell 4.2% this week, even after the restaurant technology company delivered one of its strongest quarters yet. Revenue grew 23.1% year over year to $1.91 billion, beating estimates, and adjusted earnings per share rose to $0.36, topping consensus by double digits. Annual recurring revenue grew 25%, and adjusted EBITDA jumped 38% to $221 million.
Management then raised full-year guidance, lifting recurring gross profit growth to a range of 23% to 25% and adjusted EBITDA guidance to $805 million to $825 million. Part of that confidence comes from Toast IQ Grow, a marketing agent that uses data from more than 150,000 customers. It is on track to become the fastest Toast product ever to reach $10 million in annual recurring revenue.
Insiders sold meaningfully during the quarter, including CEO Aman Narang’s $5.73 million share sale. These appear to be routine, pre-planned transactions rather than a signal about the business. Toast’s own survey found 91% of restaurant operators rate business health as good or excellent, even as inflation and hiring costs weigh on the industry.
Narang described the quarter plainly, saying “our core business continues to scale” while new markets grow rapidly alongside it. If Toast keeps posting beat-and-raise quarters like this one, the gap between execution and share price could eventually close.
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Is Toast Stock Cheap After This Week’s Drop?
Under valuation model assumptions realized through 12/31/28, the stock is modeled using:
- Revenue Growth (CAGR): 19.0%
- Operating Margins: 9.2%
- Exit P/E Multiple: 22.9x
Based on these inputs, the model estimates a target price of $44, implying a 24.5% total return from the current share price and an annualized return of 9.8% over the next 2.3 years.
Toast’s growth story remains intact even though margins are still early in their expansion path. A 9.2% modeled operating margin looks thin next to mature software peers, but that reflects Toast’s hardware- and payments-heavy model, which trades lower margins today for a stickier customer relationship once a restaurant runs its whole operation on the platform.
The 22.9x exit multiple sits below Toast’s historical range and well under many high-growth software peers. That gap suggests the market is still pricing in execution risk from newer bets like Toast IQ Grow, even though that product already runs positive margins.
Toast added a record 9,500 net locations this quarter, pushing total locations to roughly 180,000, up 22% year over year. Because location growth and rising revenue per customer tend to drive multiple expansion together, this combination is worth watching closely over the next few quarters.
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Toast Versus the Restaurant Tech Field
Shift4 Payments (FOUR) is Toast’s closest publicly traded rival, ranking second in U.S. restaurant payments behind Toast. Shift4 posted 34% revenue growth last quarter and trades near 26x forward earnings, both roughly in line with Toast’s 19.0% modeled revenue growth and 22.9x exit multiple. The key difference is profitability, since Shift4’s adjusted EBITDA margin has historically run well above Toast’s, a legacy of its card-present model spanning hospitality, sports, and entertainment.
Block competes more directly through Square for smaller, single-location restaurants, an area where Toast has traditionally focused less. Toast’s edge over both rivals is depth of restaurant-specific data, which now powers Toast IQ Grow and gives it a head start building tools tailored to food service rather than generic small business software.
As Shift4 expands internationally through its Global Blue acquisition and Toast pushes into retail and hotels, the two are increasingly chasing the same adjacent verticals. Toast’s larger location base gives it a data advantage, while Shift4’s higher margins show what Toast’s model could look like once its AI services fully scale.
What’s Driving TOST Stock Going Forward?
Expanding Toast IQ Grow into new categories is the clearest near-term catalyst. Management said the long term vision extends the agentic platform into payroll, scheduling, tax, and bookkeeping, areas restaurants currently outsource and where Toast’s operating data gives it an edge.
International and enterprise growth is accelerating from a smaller base. Management expects enterprise, international, and retail annual recurring revenue to nearly double to $200 million in 2026, helped by new hotel partnerships and expansion in the United Kingdom.
Hardware cost management remains a swing factor. Toast is managing higher memory costs through supply chain actions like using earlier hardware generations, and management expects the impact to weigh more on 2027 than 2026 before margins structurally improve.
A one-time $10 million tariff refund is being reinvested into growth rather than banked as profit. That signals management would rather compound location and product growth than smooth near-term earnings. If Toast IQ Grow scales as planned, the path toward the higher end of guidance gets easier to see.
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Should You Invest in Toast?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
