Toast, Inc.
TOST
$35.37
+5.49%
Toast, Inc. is a cloud-based, all-in-one digital technology platform purpose-built for the restaurant community, delivering software-as-a-service products, integrated payment processing, restaurant-grade hardware, and a broad partner ecosystem that functions as a full restaurant operating system across dine-in, takeout, and delivery models. The company has established itself as the leading vertical software and embedded payments platform in U.S. restaurants, differentiating itself through deep industry specialization and a land-and-expand model that monetizes both subscription software and payment volume. The current investor narrative centers on Toast's transition from a growth-at-all-costs story into a profitable compounder, with recent quarterly results showing 23.1% year-over-year revenue growth alongside meaningful net income and expanding margins. Debate now hinges on whether the payments-heavy revenue mix can sustain its growth trajectory while higher-margin subscription and AI-enabled products scale, and whether the stock's recent underperformance relative to the broader market represents an attractive entry point or a warning about decelerating momentum.…
TOST
Toast, Inc.
$35.37
Related headlines
Investment Opinion: Should I buy TOST Today?
Rating: Buy (accumulate on weakness). The thesis is that Toast has crossed the profitability inflection — Q2 2026 net income of $154 million versus $80 million a year earlier, with operating income doubling to $152 million — while still growing revenue 23.1% YoY, so the stock's 19.06x forward PE on consensus EPS of $2.59 is an undemanding price for a vertical software-infrastructure platform at this stage of margin ramp. That view is anchored by the Street: 21 Buy ratings, 10 Holds, zero Sells, a mean rating of 1.81, and an average target of $38.81 implying roughly 15.8% upside from $33.53, with the $45.00 high target implying about 34% upside.
The supporting evidence is broad. Valuation is the cheapest it has been on a sales basis in the company's public history — PS of 3.36x and EV/Sales of 2.60x versus 16.57x in Q2 2025 and 33.76x in Q4 2021 — while growth remains above 20% and margins are expanding (gross margin 27.04% in Q2 2026 versus 25.29% a year earlier; net margin 8.07% versus 5.16%; EBITDA margin 9.12% versus 6.26%). Profitability is now cash-backed: free cash flow of $130 million in Q2 2026 and $576 million TTM against only $14 million of capex, with $1.304 billion of cash, debt-to-equity of 0.0188, a current ratio of 2.75, ROE of 16.1%, and $163 million of buybacks executed in the quarter. The implied upside to the $38.81 average target is 15.8%, and the forward multiple of 19.06x compares favorably with the trailing PE of 60.19x, confirming the earnings ramp is the mechanism for multiple normalization rather than a de-rating of the business.
The risks that could invalidate this are threefold: (1) payments concentration — roughly 82% of Q2 2026 revenue ($1.57 billion of $1.908 billion) is transaction-based, so a restaurant traffic slowdown hits the top line directly and caps gross margin near 27%; (2) the earnings bridge — consensus EPS of $2.59 versus trailing EPS of $0.0165 means any operating-margin stall below the current 7.97% forces estimate cuts; and (3) volatility — beta of 1.709 and a -42.77% max drawdown mean a 25-35% drawdown is a realistic sizing assumption. The rating would upgrade to a stronger Buy if subscription revenue scales enough to push gross margin into the low-30s while payments growth holds above 20%, and would downgrade to Hold if revenue growth decelerates below 15% or gross margin slips back under 26%. On balance the stock looks modestly undervalued relative to its own history and fairly valued to slightly cheap versus peers on a growth-adjusted basis — not a deep-value situation, but a reasonable risk/reward for a profitable compounder.
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TOST 12-Month Price Forecast
The forward view is constructive but not euphoric: Toast is priced at 19.06x forward earnings for 23.1% growth with margins expanding across every line — gross margin 27.04% versus 25.29%, net margin 8.07% versus 5.16%, EBITDA margin 9.12% versus 6.26% — and the balance sheet carries essentially no debt with $1.304 billion of cash. The one-month move of +12.55% versus SPY's -1.99% (relative strength +14.54 points) suggests the market is beginning to re-rate the profitability inflection, yet the stock remains 15.5% below its $39.67 high and 6.13% lower over twelve months, so the recovery is early rather than extended. The central uncertainty is the 82% payments revenue mix: if subscription and AI products lift gross margin toward the low-30s, the multiple has room toward the $45 high target; if payments volume decelerates first, the $2.59 forward EPS that anchors the 19x multiple becomes vulnerable and the $25-$29 bear zone reopens. I would upgrade to high confidence on a gross margin print above 29% with revenue growth still above 20%, and downgrade to neutral if gross margin falls below 26% or revenue growth decelerates below 15%.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Toast, Inc.'s 12-month outlook, with a consensus price target around $38.81 and implied upside of +9.7% versus the current price.
Average Target
$38.81
31 analysts
Implied Upside
+9.7%
vs. current price
Analyst Count
31
covering this stock
Price Range
$25 - $45
Analyst target range
Coverage is robust with 27 analysts, and sentiment is clearly bullish: 21 Buy ratings, 10 Hold ratings, zero Sells, and a consensus recommendation of "buy" with a mean rating of 1.81 (where 1 is a strong buy). The average target price of $38.81 implies roughly 15.8% upside from the current $33.53, and the consensus leans constructive rather than euphoric, consistent with a stock that has underperformed over the past year but is now recovering. The target range spans $25.00 to $45.00, a wide 80% spread that signals meaningful disagreement about the growth and margin trajectory. The high target of $45.00 (about 34% above the current price) likely assumes accelerating subscription and AI-driven revenue, sustained margin expansion toward double digits, and multiple re-rating as the forward PE of 19x proves too cheap; the low target of $25.00 (about 25% below current) likely prices in restaurant spending weakness, payments volume deceleration, or margin compression from competitive pressure. Recent institutional actions show a mix of reaffirmations rather than aggressive upgrades, with Truist maintaining Buy in October 2026, BNP Paribas downgrading to Neutral from Outperform in September 2026, and RBC, DA Davidson, and Keefe Bruyette holding neutral stances, suggesting analysts are confident in the long-term story but cautious on near-term catalysts.
Bulls vs Bears: TOST Investment Factors
The bull case currently has stronger evidence: earnings roughly doubled year-over-year with consistent sequential progression, the forward PE of 19.06x is undemanding for 23% growth, the balance sheet carries essentially no debt (D/E 0.0188) with $1.304 billion in cash, and 21 of 27 analysts rate Buy with zero Sells. The bear case rests less on fundamentals than on structure — an 82% payments revenue mix that caps gross margin at 27.04%, a 1.709 beta with a -42.77% max drawdown, and an 80% spread in analyst targets that reflects real disagreement about the margin trajectory. The single most important tension is whether the subscription and AI-enabled layer can scale fast enough to lift gross margins above the high-20s before payments growth decelerates; if gross margin holds near 27% and payments volume slows, the forward EPS of $2.59 that justifies the 19x multiple becomes vulnerable, and the stock would likely retest the $29-$30 consolidation zone. Conversely, if subscription mix expands and margins push toward the low-30s, the multiple has room to re-rate toward the $45 high target.
Bullish
- Earnings inflection is dramatic and real: Q2 2026 net income reached $154 million (8.07% net margin) versus $80 million (5.16%) in Q2 2025, and operating income doubled to $152 million from $80 million. The quarterly progression is consistent — net income rose from $56M (Q1 2025) to $101M (Q4 2025) to $126M (Q1 2026) to $154M (Q2 2026) — showing operating leverage rather than a one-off quarter. This is what drives the trailing PE of 60.19x collapsing to a forward PE of 19.06x on consensus EPS of $2.59.
- Forward multiple of 19x is cheap for 23% growth: At $33.53, TOST trades at 19.06x forward earnings against 23.1% revenue growth and expanding margins, with a PS ratio of just 3.36x and EV/Sales of 2.60x. For a vertical software-infrastructure platform growing above 20%, those sales multiples sit near the low end of its own historical band (PS was 16.57x in Q2 2025 and 33.76x in Q4 2021). The market is pricing normalization, not deterioration.
- Fortress balance sheet with real cash generation: Debt-to-equity is just 0.0188, the current ratio is 2.75, and cash stood at $1.304 billion at Q2 2026. Free cash flow was $130 million in the quarter (TTM $576 million) against only $14 million of capex, and management repurchased $163 million of stock — a capital-light model funding its own growth and buybacks.
- Analyst consensus is constructive with no sells: Of 27 analysts, 21 rate Buy and 10 Hold with zero Sells, and the mean rating of 1.81 signals strong conviction. The average target of $38.81 implies 15.8% upside, and the high target of $45.00 implies roughly 34% upside. The absence of sell ratings despite a 6.13% one-year decline suggests the Street views the pullback as a valuation reset, not a broken thesis.
Bearish
- Payments concentration ties revenue to restaurant volumes: Technology Service (payments) revenue of $1.57 billion dwarfs License (subscription) revenue of $290 million, meaning roughly 82% of the top line is transaction-based. That makes growth highly sensitive to restaurant traffic and consumer discretionary spending, and it caps gross margin at 27.04% — a payments-like profile rather than a software-like one.
- Trailing valuation still looks expensive: The trailing PE of 60.19x, EV/EBITDA of 46.86x, PCF of 31.27x, and PB of 9.73x are all rich on reported numbers. The entire bull case rests on forward EPS of $2.59 materializing versus trailing EPS of $0.0165 — an enormous gap that leaves little room for execution error.
- High beta and severe drawdown history: Beta of 1.709 means the stock is roughly 71% more volatile than the market, and the maximum drawdown of -42.77% shows how violently it can reverse. The one-year return of -6.13% versus SPY's +10.39% (relative strength -16.52 points) is a reminder that constructive setups in this name have repeatedly failed.
- Analyst dispersion signals genuine uncertainty: Targets span $25.00 to $45.00 — an 80% spread — and recent actions are mixed: BNP Paribas downgraded to Neutral in September 2026 while RBC, DA Davidson, and Keefe Bruyette stayed neutral. Only Truist reaffirmed Buy in October 2026, indicating limited near-term conviction and few catalysts to force upgrades.
TOST Technical Analysis
Toast is in a recovery phase within a broader range-bound consolidation, with the stock down 6.13% over the trailing year but up 14.13% over six months, a clear divergence between intermediate and long-term trends. At $33.53, the stock trades at approximately 64.6% of its 52-week range (low of $22.26 to high of $39.67), positioning it in the upper-middle of the band, roughly 15.5% below its 52-week high and 50.6% above its low. This positioning suggests the stock has reclaimed substantial ground from its lows but has not yet confirmed a breakout to new highs, leaving it in a constructive but unconfirmed uptrend. Recent momentum is decisively positive: the stock has gained 12.55% over the past month versus a 1.99% decline in SPY, producing a relative strength of +14.54 percentage points, while the three-month change of -3.65% shows the rally is a recent inflection rather than a sustained trend. This one-month surge against a negative one-year return signals a potential trend reversal or mean-reversion rally off the lows, and the 4.29 short ratio indicates meaningful short interest that could fuel further upside if momentum persists. Key technical support sits at the 52-week low of $22.26, with secondary support around the $29-$30 area where the stock consolidated in September and October; resistance is defined by the 52-week high of $39.67, and a breakout above that level would confirm a new uptrend and likely trigger short covering. A beta of 1.709 means the stock is roughly 71% more volatile than the market, implying position sizing should account for amplified drawdowns, and the maximum drawdown of -42.77% underscores the risk of sharp reversals even within constructive setups.
Beta
1.71
1.71x market volatility
Max Drawdown
-42.8%
Largest decline past year
52-Week Range
$22-$40
Price range past year
Annual Return
-0.8%
Cumulative gain past year
| Period | TOST Return | S&P 500 |
|---|---|---|
| 1m | +17.7% | -1.0% |
| 3m | +1.9% | -0.2% |
| 6m | +41.2% | +4.0% |
| 1y | -0.8% | +13.6% |
| ytd | +4.0% | +12.4% |
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TOST Fundamental Analysis
Toast's revenue trajectory remains robust, with Q2 2026 revenue of $1.908 billion growing 23.1% year-over-year from $1.55 billion in Q2 2025, and the sequential progression from $1.63 billion in Q1 2026 confirms steady expansion. The multi-quarter trend shows acceleration from the $1.337 billion reported in Q1 2025, and the revenue mix is dominated by Technology Service (payments) at $1.57 billion versus License (subscription) at $290 million, meaning the payments engine is doing the heavy lifting while the higher-margin subscription layer represents the longer-term margin lever. This growth profile supports the investment case as a durable vertical software compounder, though the payments-heavy mix means revenue is sensitive to restaurant transaction volumes and consumer spending. Profitability has inflected meaningfully: Q2 2026 net income reached $154 million with a net margin of 8.07%, up from $80 million and a 5.16% margin in Q2 2025, while gross margin expanded to 27.04% from 25.29% a year earlier. Operating income rose to $152 million (7.97% operating margin) from $80 million (5.16%), and EBITDA grew to $174 million (9.12% margin) from $97 million (6.26%), demonstrating clear operating leverage as revenue scales faster than costs. The balance sheet is exceptionally strong, with debt-to-equity of just 0.0188, a current ratio of 2.75, and $1.304 billion in cash at the end of Q2 2026, giving the company ample liquidity to fund growth internally. Free cash flow of $130 million in Q2 2026 (TTM $576 million) against capital expenditure of only $14 million reflects a capital-light model, while ROE of 16.1% and ROA of 8.95% confirm efficient capital deployment; the company also repurchased $163 million of stock in the quarter, signaling confidence in its own valuation.
Quarterly Revenue
$1.9B
2026-06
Revenue YoY Growth
+23.1%
YoY Comparison
Gross Margin
27.0%
Latest Quarter
Free Cash Flow
$576000000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is TOST Overvalued?
Because Toast is profitable (Q2 2026 net income of $154 million), the PE ratio is the primary metric: the trailing PE of 60.19x drops to a forward PE of 19.06x, an enormous gap that implies the market expects earnings to roughly triple, consistent with consensus EPS estimates of $2.59 versus trailing EPS of $0.0165. The forward multiple of 19.06x is remarkably reasonable for a company growing revenue 23% with expanding margins, suggesting the stock is priced for continued earnings inflection rather than perfection. On peer comparison, the PS ratio of 3.36x and EV/Sales of 2.60x are modest for a software-infrastructure business growing above 20%, while the EV/EBITDA of 46.86x and PCF of 31.27x reflect the still-early stage of the profitability ramp; the PEG ratio of 0.037 is distorted by the near-zero trailing EPS base but directionally signals that growth is not being fully priced. The PB ratio of 9.73x is elevated but consistent with an asset-light software model generating 16.1% ROE. Historically, Toast's PS ratio has compressed dramatically from 33.76x in Q4 2021 and 16.57x in Q2 2025 to the current 3.36x, while the PE ratio has fallen from 79.09x in Q2 2025 and 52.22x in Q4 2025 to 60.19x trailing but just 19.06x forward. This places the stock near the low end of its own historical valuation band on a sales basis, suggesting either a value opportunity or that the market has repriced the growth premium; given the improving profitability and 23% growth, the compression looks more like multiple normalization than fundamental deterioration.
PE
60.2x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 26x~253x
vs. Industry Avg
24.7x
Industry PE ~24.7x*
EV/EBITDA
46.9x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on the revenue mix and the earnings bridge. Roughly 82% of Q2 2026 revenue ($1.57 billion of $1.908 billion) came from payments, so a slowdown in restaurant transaction volumes flows almost directly to the top line, and gross margin of 27.04% leaves limited buffer — cost of revenue was $1.392 billion against $516 million of gross profit. The forward PE of 19.06x depends on consensus EPS of $2.59 versus trailing EPS of $0.0165, meaning the market has already capitalized a roughly 150x earnings ramp; any quarter where operating margin stalls below the current 7.97% would force a reset of that assumption. Positively, debt-to-equity of 0.0188, a current ratio of 2.75, and $1.304 billion of cash mean solvency is not a risk — the risk is multiple compression from a growth stumble, not balance-sheet stress. Market and competitive risks are dominated by valuation sensitivity and vertical-software competition. With a beta of 1.709, TOST amplifies market moves by roughly 71%, and the -42.77% maximum drawdown demonstrates how quickly sentiment can reverse; the one-year relative strength of -16.52 points versus SPY shows the stock has already lagged in a rising market. Competition is intensifying — SoundHound's September 2026 expansion into three restaurant chains highlights voice-AI entrants targeting Toast's QSR base, while Square and legacy POS providers pressure payments take rates. Analyst positioning reinforces the caution: BNP Paribas downgraded to Neutral in September 2026, and RBC, DA Davidson, and Keefe Bruyette remain neutral, with the $25.00 low target implying roughly 25% downside if restaurant spending weakens or margins compress. The worst-case scenario is a consumer-led restaurant traffic decline that slows payments volume while subscription growth fails to offset it, compressing gross margin below 27% and pushing forward EPS estimates down toward the low end. In that chain, the stock would likely retrace to the $29-$30 September-October consolidation zone first, then toward the 52-week low of $22.26 — a decline of roughly 34% from the current $33.53. The analyst low target of $25.00 implies about 25% downside and serves as a reasonable intermediate bear-case marker, while a full retest of the -42.77% historical max drawdown from the $39.67 high would be materially worse; investors should size positions for a realistic 25-35% drawdown given the 1.709 beta.
FAQ
Ranked by severity, the first risk is revenue concentration: roughly 82% of Q2 2026 revenue ($1.57 billion of $1.908 billion) is transaction-based payments, so a consumer-led restaurant traffic slowdown flows almost directly to the top line and caps gross margin at 27.04%. Second is the earnings bridge — consensus EPS of $2.59 versus trailing EPS of $0.0165 means any quarter where operating margin stalls below the current 7.97% forces estimate cuts and compresses the 19.06x forward multiple. Third is volatility and market sensitivity: beta of 1.709 amplifies market moves by roughly 71%, the maximum drawdown is -42.77%, and the one-year relative strength versus SPY is -16.52 points, so a sector rotation out of high-multiple software would hit this name disproportionately. Fourth is competitive pressure — SoundHound's September 2026 expansion into three restaurant chains and Square's take-rate competition threaten both the AI narrative and payments economics, while the 80% analyst target spread ($25 to $45) and BNP Paribas's September 2026 downgrade to Neutral show conviction is not uniform.
The scenario framework assigns 50% to the base case of $36-$40, 25% to the bull case of $42-$45, and 25% to the bear case of $25-$29. The base case — the most likely outcome — assumes revenue near the $11.91 billion consensus, EPS around $2.59, gross margin in the high-20s, and a grind toward the $38.81 average target, roughly 15.8% upside, as the 19x forward multiple proves fair for 20%-plus growth. The bull case requires gross margin crossing 30% and operating margin exceeding 10%, re-rating the multiple toward the mid-20s and carrying the stock to the $45.00 high target, about 34% above current levels. The bear case assumes restaurant traffic weakness slows payments volume, gross margin slips below 27%, and the stock retests the $29-$30 zone before approaching the $25.00 analyst low target, roughly 25% downside, with the $22.26 52-week low as the tail-risk floor. The key assumption behind the base case is that subscription and AI products scale gradually without a payments deceleration.
The answer depends heavily on which multiple you use, and that gap is the heart of the debate. On trailing figures the stock looks expensive — PE of 60.19x, EV/EBITDA of 46.86x, PCF of 31.27x, PB of 9.73x — but the forward PE of 19.06x on consensus EPS of $2.59 versus trailing EPS of $0.0165 implies the market expects earnings to roughly triple, and that multiple is undemanding for 23.1% growth. On sales, the 3.36x PS and 2.60x EV/Sales sit near the low end of Toast's own history, down from 16.57x in Q2 2025 and 33.76x in Q4 2021, which reads as multiple normalization rather than deterioration. The market is therefore pricing continued margin expansion and the earnings ramp, not perfection — if gross margin pushes toward the low-30s the stock screens undervalued versus its history, but if the EPS bridge stalls the trailing multiples reassert themselves and the stock looks expensive again.
On a risk/reward basis the setup is favorable but not exceptional: at $33.53 the stock trades 15.8% below the $38.81 average analyst target and roughly 34% below the $45.00 high target, while sitting 50.6% above its $22.26 52-week low, so the near-term skew is modestly positive. The valuation support is real — 19.06x forward earnings for 23.1% revenue growth, a 3.36x PS ratio near the low end of its historical band, $576 million of TTM free cash flow, and essentially no debt (D/E 0.0188) — and 21 of 27 analysts rate Buy with zero Sells. The biggest downside risk is the 82% payments revenue concentration: a restaurant traffic slowdown would hit the top line directly, cap gross margin near 27%, and reopen the $25-$29 bear zone, roughly 25% below the current price. It is a good buy for growth-oriented investors with a multi-year horizon who can absorb a 25-35% drawdown given the 1.709 beta, ideally accumulating on weakness toward the $29-$30 support rather than chasing the recent 12.55% one-month rally.
Toast fits a long-term growth holding far better than a short-term trade. The company is still in a multi-year margin ramp — net income progressed from $56 million in Q1 2025 to $154 million in Q2 2026, gross margin from 25.29% to 27.04%, and operating margin from 5.16% to 7.97% — and that operating-leverage story needs several more quarters to play out, which argues for a minimum holding period of 18-24 months. It pays no dividend (payout ratio 0, yield 0), so there is no income component to anchor a shorter horizon, and the 1.709 beta with a -42.77% max drawdown means short-term holders face amplified drawdown risk; the 4.29 short ratio and 12.55% one-month rally versus SPY's -1.99% show how quickly sentiment can swing. Earnings visibility is improving but still hinges on the payments mix, so position sizing should assume a 25-35% drawdown. Traders could work the $29-$30 support to $39.67 resistance range, but the core thesis is a multi-year profitability inflection, not a momentum trade.