TOST: U S Restaurant Share Gains Will Drive Future Fintech Pricing Power

Analysts nudged their average price target on Toast slightly higher to the mid $40s, citing resilient recurring revenue growth, improving profitability, and conservative longer term guidance as supportive of modest upside despite a series of modest target cuts and ongoing macro uncertainty.

Analyst Commentary

Street research paints a nuanced picture for Toast, with most firms trimming price targets while still acknowledging strong execution and an attractive long term growth runway. The balance of opinion leans constructive on fundamentals, even as valuation is recalibrated to reflect macro risks and mixed medium term commentary.

Bullish Takeaways

• Bullish analysts highlight robust recurring revenue and gross profit growth, with initial FY26 commentary pointing to at least 20 percent plus recurring gross profit and healthy core U.S. restaurant margins, supporting a premium multiple versus slower growth payments peers.
• New coverage initiations with Buy and Overweight ratings cite continued market share gains in the U.S. restaurant vertical, a still underpenetrated small and midsize business base, and sizable total addressable market expansion from enterprise, food and beverage retail, and international as drivers of sustained 20 percent plus top line growth.
• Several firms emphasize Toast's pricing power in fintech and complementary SaaS, viewing incremental monetization of payments and software as a key lever for margin expansion and long term earnings power, even if near term spending remains elevated.
• Analysts who remain positive argue that Q3 was a beat and raise quarter, with guidance that appears conservative relative to the company’s execution track record. They see room for upside revisions and multiple support if macro conditions stabilize.

Bearish Takeaways

• Bearish analysts are trimming price targets into the mid 40 dollar range and below, reflecting more cautious assumptions around FY26, an uncertain macro backdrop, and the potential for slower transaction growth if restaurant spending softens.
• Some research notes warn that Q4 and 2025 expectations across payments and fintech could prove too high given tougher year over year comparisons after a strong prior year holiday period. This could limit near term upside to Toast’s valuation.
• Neutral stances point to recent model resets and price target cuts as evidence that execution alone may not be enough to drive multiple expansion, with investors increasingly focused on the balance between growth investments and visible profitability milestones.
• Concerns around pricing actions, including prior starter kit software price adjustments, reinforce the view that competition for smaller restaurants remains intense. This could cap take rate expansion and pressure unit economics if discounting resurfaces.

What's in the News

• Toast entered a multi-year global partnership with Uber to deepen delivery and marketing integrations, making Uber its preferred food delivery marketplace and enabling restaurants to run Uber Eats promotions directly from the Toast platform starting in 2026 (Client Announcements).
• The company announced a major expansion of its Toast IQ intelligence ecosystem, launching a conversational AI assistant that surfaces real time insights and can take actions such as updating menus and schedules across approximately 148,000 customer locations (Product Related Announcements).
• Toast partnered with TGI Fridays to roll out its POS platform, Toast Go handhelds, Kitchen Display Systems, and multi location management across all U.S. locations to support operational efficiency and scalability (Client Announcements).
• The company agreed to deploy the Toast platform, including Toast Go handhelds and partner integrations, across everbowl's fast growing footprint of more than 100 superfood and smoothie locations nationwide (Client Announcements).
• Toast completed a buyback tranche totaling 3.87 million shares, or about 0.69 percent of shares outstanding, for $109.72 million under its repurchase program announced in February 2024 (Buyback Tranche Update).

Valuation Changes

• Fair Value: risen slightly from approximately $47.35 to $47.42 per share, reflecting a modest uptick in long term expectations.
• Discount Rate: edged down marginally from about 7.33 percent to 7.32 percent, implying a slightly lower perceived risk or cost of capital.
• Revenue Growth: increased modestly from roughly 18.07 percent to 18.37 percent, signaling a small upgrade to long term top line assumptions.
• Net Profit Margin: improved slightly from around 8.05 percent to 8.08 percent, indicating a minor enhancement in projected profitability.
• Future P/E: declined slightly from about 47.34x to 46.88x, suggesting a marginally lower multiple applied to forward earnings.