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.

Expanding digital solutions and automation drive increased market share, recurring revenues, and operational efficiency for restaurants upgrading from legacy systems.
New market entries, product upselling, and strategic partnerships diversify revenue streams and deepen customer loyalty, boosting earnings resilience.
Rising costs, industry headwinds, hardware challenges, intense competition, and risky international expansion all threaten Toast's margins, revenue diversity, and long-term growth.

Catalysts

About Toast

Operates a cloud-based digital technology platform for the restaurant industry in the United States, Ireland, India, and internationally.What are the underlying business or industry changes driving this perspective?

The rapid adoption of integrated digital payment and ordering solutions-including mobile and contactless experiences-continues to expand Toast's addressable market, positioning the company to capture increased transaction volume and higher recurring fintech and software revenues as restaurants upgrade from legacy systems.
Long-term challenges with labor shortages and wage pressures in hospitality drive restaurants to seek automation and operational efficiency, increasing demand for Toast's AI-driven tools (such as ToastIQ and Sous Chef) and productivity-enhancing hardware (Toast Go 3), which should support sustained revenue growth and improve net margins.
Expansion into new market segments (enterprise chains, food and beverage retail, and international markets like Australia) is expected to create diversified and fast-growing high-ARPU customer streams, which will drive top-line growth and help improve earnings resilience.
The consistent increase in ARPU-both through upselling additional modules (inventory, loyalty, marketing, etc.) and innovative fintech solutions like Toast Capital-suggests Toast is successfully scaling its platform ecosystem, boosting net retention rates and high-margin recurring revenue streams.
Strategic partnerships (e.g., American Express integration with Resy, Tock, and Toast Tables) allow Toast to offer differentiated, data-driven, personalized experiences for diners and restaurants, reinforcing customer stickiness and loyalty, likely translating into elevated transaction volumes and improved long-term earnings visibility.

Toast Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Toast's revenue will grow by 17.3% annually over the next 3 years.
Analysts assume that profit margins will increase from 4.1% today to 8.3% in 3 years time.
Analysts expect earnings to reach $738.5 million (and earnings per share of $1.23) by about September 2028, up from $224.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $884.1 million in earnings, and the most bearish expecting $544 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 53.5x on those 2028 earnings, down from 110.5x today. This future PE is greater than the current PE for the US Diversified Financial industry at 16.4x.
Analysts expect the number of shares outstanding to grow by 2.64% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.45%, as per the Simply Wall St company report.

Toast Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Sustained reliance on increasing sales and marketing expenditures, especially to accelerate growth in new customer segments and international markets, could pressure long-term net margins and earnings if productivity gains or market share expansion fail to offset higher costs.
Hardware-related risks, including anticipated higher tariff expenses and the need to continually upgrade devices like Toast Go 3, may impact cost of revenue and gross margins over time, particularly if hardware sales remain a low-margin or unprofitable part of the business.
Flat to declining gross payment volume (GPV) per location-down 1% year-over-year-and ongoing negative same-store sales trends in the restaurant industry could limit top-line revenue growth and curtail transaction-based earnings if industry headwinds persist.
Competitive threats in both SMB and enterprise segments remain elevated, with legacy vendors and diversified competitors (like Square or Clover) potentially responding with aggressive product innovation or pricing, which could force Toast to compress ARPU or increase customer acquisition costs, impacting net margins.
International expansion carries significant execution risk-the text notes slower ARPU builds and brand penetration outside the US and the need for localization investments; failure to achieve targeted scale or market fit internationally could delay revenue diversification and constrain overall earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $50.542 for Toast based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $60.0, and the most bearish reporting a price target of just $36.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $8.9 billion, earnings will come to $738.5 million, and it would be trading on a PE ratio of 53.5x, assuming you use a discount rate of 7.5%.
Given the current share price of $42.45, the analyst price target of $50.54 is 16.0% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

TOST: Expanded Restaurant Platform Reach Will Drive Long-Term Market Leadership