Company Overview - Toast, Inc. is a Boston-based cloud software provider focused on the restaurant industry, offering an integrated point-of-sale and management platform built on Android. The company has positioned itself as a technology partner rather than just a payments provider, with an expanding suite of software, payments, and AI tools supporting long-term growth narratives [4]. Financial Performance - In the third quarter of 2025, Toast surpassed $2 billion in annual recurring revenue (ARR) for the first time, effectively doubling ARR in just two years, highlighting the scalability and resilience of its platform [3]. - DA Davidson analyst Peter Heckmann lowered the price target on Toast to $36 from $42 while maintaining a Neutral rating, expecting the company to modestly exceed its own forecasts and broader consensus, although growth and margin expansion are anticipated to be more measured than in the past four to six quarters [1]. Product Development - The rollout of AI-driven products such as Toast IQ and Toast Advertising has seen strong early adoption, with over 25,000 restaurants using Toast IQ more than 235,000 times since early October, reinforcing engagement across its customer base [3]. Market Position - Despite the normalization of near-term expectations, Toast's recurring Gross Payment Volume remains a key area of strength that could provide incremental upside [1].

Core Insights - Toast is a fintech company that has established a strong recurring revenue model, particularly in the restaurant sector, which is often overlooked by long-term investors [1][2] - The company’s Annualized Recurring Revenue (ARR) has grown approximately 30% year-over-year, surpassing $1.9 billion in mid-2025 and expected to exceed $2 billion by Q3 2025 [3] - Toast has achieved GAAP profitability for the first time in full-year 2024, reporting a net income of $19 million and Adjusted EBITDA of $373 million [5][6] Revenue Model - Toast's platform includes essential services for small business owners, such as point-of-sale software, payment processing, payroll, and analytics, which contribute to its recurring revenue [3][4] - The company has a significant market opportunity, with a total addressable market of approximately 1.4 million potential locations, while currently servicing around 156,000 restaurant locations [8] Growth and Expansion - Toast's new offerings, such as Toast IQ and Toast Advertising, are designed to enhance customer engagement and increase revenue per customer over time, indicating a strategy of expansion revenue [9] - The company is positioned as a subscription-first fintech with real earnings and improving margins, suggesting a long runway for growth and market share acquisition [10] Market Position and Strategy - Toast's business model is less dependent on restaurant sales volume, as its revenue is derived from software and payment fees, providing a more stable cash flow even during economic downturns [11] - The company is viewed as a long-term compounder, with a focus on deepening monetization rather than merely increasing the number of locations [12] Investment Considerations - Investors are advised to consider average entry points during market volatility, as restaurant spending is cyclical and sensitive to macroeconomic conditions [12] - Monitoring Toast's progress in enterprise and international expansion could be crucial for long-term valuation growth [12]

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Toast (TOST), and emphasizes the importance of using these recommendations in conjunction with other research tools like the Zacks Rank to make informed investment decisions [1][5]. Brokerage Recommendations for Toast - Toast has an average brokerage recommendation (ABR) of 1.77, indicating a consensus between Strong Buy and Buy, based on recommendations from 30 brokerage firms [2]. - Out of the 30 recommendations, 18 are classified as Strong Buy, accounting for 60% of the total recommendations, while one is classified as Buy, making up 3.3% [2]. Limitations of Brokerage Recommendations - The article highlights that relying solely on brokerage recommendations may not be wise, as studies show limited success in guiding investors towards stocks with the best price increase potential [5]. - Analysts from brokerage firms often exhibit a strong positive bias due to vested interests, issuing five "Strong Buy" recommendations for every "Strong Sell" [6][11]. Zacks Rank as a Reliable Indicator - The Zacks Rank, which classifies stocks into five groups based on earnings estimate revisions, is presented as a more reliable indicator of a stock's near-term price performance compared to ABR [8][12]. - The Zacks Rank is timely and reflects changes in earnings estimates quickly, unlike the ABR, which may not always be up-to-date [13]. Current Earnings Estimates for Toast - The Zacks Consensus Estimate for Toast's current year earnings remains unchanged at $1.04, indicating steady analyst views on the company's earnings prospects [14]. - Due to the unchanged consensus estimate and other factors, Toast has received a Zacks Rank of 3 (Hold), suggesting caution despite the Buy-equivalent ABR [15].

Core Insights - The article emphasizes the importance of identifying innovative and disruptive technologies that can reshape industries and drive long-term value creation [1] Group 1: Company Insights - The company is focused on equity research to assist investors in making informed decisions through clear and insightful analysis [1] - The company has a beneficial long position in the shares of TOST, indicating confidence in its future performance [2] Group 2: Industry Insights - The industry is characterized by a strong passion for markets and investment research, with a focus on value and growth strategies across various sectors [1] - The engagement with the investment community through platforms like Seeking Alpha highlights the collaborative nature of investment research and analysis [1]

Core Viewpoint - Growth stocks are leading the market and present attractive investment opportunities, with specific recommendations for five stocks to consider for a growth-focused portfolio. Group 1: Nvidia - Nvidia is a major beneficiary of the AI buildout, holding approximately 90% market share in the GPU space, which is crucial for AI workloads [2] - The company’s CUDA software platform and NVLink interconnect system provide a competitive advantage, particularly in large language model training [2] - Current market capitalization is $4.5 trillion, with a gross margin of 70.05% [3][4] Group 2: Alphabet - Alphabet operates its own AI data center and has a complete AI tech stack, including custom AI chips for training its leading LLM, Gemini [5] - The integration of Gemini across its products, including Google Search, has led to increased queries and revenue [6] - Google Cloud's revenue grew by 34% last quarter, indicating strong operating leverage and demand for its Tensor Processing Units (TPUs) [6] Group 3: Pinterest - Pinterest is currently valued at a forward P/E ratio of around 12.5 and has experienced a revenue growth of 17% last quarter [6] - The company is transforming into an AI-powered discovery shopping platform, enhancing its visual search capabilities [6][8] - Its Performance+ suite aids advertisers in creating effective campaigns and improving targeting [8] Group 4: Toast - Toast is a significant player in the SaaS space, providing software solutions for small- and midsized restaurant operators [9] - The company reported a 30% increase in annual recurring revenue (ARR) last quarter, with a 23% rise in new locations using its services [10] - Toast is poised for further growth as it expands into larger chains and international markets [10] Group 5: e.l.f. Beauty - e.l.f. Beauty has gained market share in the mass-market cosmetics sector and continues to expand internationally [11] - The acquisition of the Rhode brand, which achieved over $200 million in sales in under three years, is expected to drive significant growth [13][14] - The brand's recent launch in LVMH's Sephora presents a substantial opportunity for increased distribution and brand awareness [14]

Core Insights - The U.S. retail sales report for November shows a month-over-month increase of 0.6% and a year-over-year increase of 3.1%, indicating strong consumer spending trends [1] Winners - Nonstore retailers, including e-commerce giant Amazon, experienced a sales increase of 7.2% in November, suggesting continued positive momentum for the company [2] - Amazon's growth is further supported by its expanding sponsored ad business, operational efficiencies from robotics and AI, and accelerating growth in its cloud computing unit, AWS [4] - Sporting goods stores saw a notable sales increase of 7.8%, with Nike showing signs of a turnaround, bolstered by significant insider buying from CEO Elliot Hill and Apple CEO Tim Cook [5][7] - Dick's Sporting Goods is also positioned as a potential winner, focusing on experiential retail to attract customers while managing its recent acquisition of Foot Locker [8] - E.l.f. Beauty benefited from a 6.7% year-over-year sales increase in health and personal care stores, supported by its market share growth and the acquisition of Rhode [9][10] - The food services and drinking places category saw a 4.9% sales increase, which is expected to benefit restaurant software provider Toast as it expands its customer base [11] Losers - Furniture stores and building material and garden supply dealers faced negative sales growth, with declines of 1.4% and 2.8%, respectively, impacting companies like RH, which is navigating a challenging market [12] - Home improvement retailers Home Depot and Lowe's have struggled with same-store sales growth, although both have had strong starts in 2026 [14]

Core Thesis - Toast, Inc. is positioned as a high-conviction compounder in the restaurant technology sector, leveraging a cloud-based platform to unify fragmented systems and drive growth [2][5] Company Overview - Toast, Inc. operates a digital technology platform for the restaurant industry across the U.S., Ireland, India, and internationally, focusing on payment processing, kitchen operations, payroll, and customer engagement [2] - The company has a "land-and-expand" model, starting with point-of-sale solutions and gradually introducing higher-margin software modules [2] Market Position - Toast commands approximately 13% market share in the U.S., serving over 114,000 restaurants, and is expanding both internationally and into adjacent food and beverage retail sectors [3] Financial Performance - The company is asset-light with recurring revenues, showing growth in free cash flow and a clear path to margin expansion, achieving profitability in 2023 with an EPS of $0.55 in 2024 [4] - Toast is guiding towards a 30-35% adjusted EBITDA margin by 2027, with net margins improving from -32% in 2019 to 2% in 2024 and ROCE trending toward 15% [4] Risk and Resilience - Despite exposure to economic cycles and regulatory risks in FinTech, Toast maintains a robust balance sheet with $1.2 billion in cash against $949 million in liabilities, providing a solid buffer [5] - The company scores 18.5/22 under The Compounder framework, indicating it is a "High Conviction" opportunity with potential for durable double-digit growth in global restaurant technology markets [5]

This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. Dive Brief: Payments behemoth Fiserv’s Clover unit dominates the small restaurant point-of-sale card processing market with an estimated 20% share, including 175,000 locations, based on an analysis by the financial firm Baird. Fintech Toast follows with an estimated 17% stake, including 145,000 locations, according to the Jan. 7 report from the firm’s research ar ...

Company Performance - Toast (TOST) stock increased by 1.64% to $36.66, outperforming the S&P 500's decline of 0.34% and the Dow's drop of 0.94% [1] - Over the past month, Toast shares gained 4.31%, surpassing the Computer and Technology sector's loss of 1% and the S&P 500's gain of 1.19% [1] Earnings Expectations - The upcoming earnings report for Toast is anticipated to show an EPS of $0.24, reflecting a 380% increase from the same quarter last year [2] - Quarterly revenue is expected to reach $1.62 billion, marking a 20.99% increase compared to the previous year [2] Annual Projections - For the annual period, earnings are projected at $1.04 per share, indicating a significant increase of 3366.67% from last year, while revenue is expected to remain stable at $6.14 billion [3] Analyst Estimates - Recent adjustments to analyst estimates for Toast are crucial as they reflect current business trends, with positive revisions indicating confidence in performance and profit potential [3] Valuation Metrics - Toast's Forward P/E ratio stands at 29.01, which is higher than the industry average Forward P/E of 25 [6] - The Internet - Software industry, part of the Computer and Technology sector, holds a Zacks Industry Rank of 57, placing it in the top 24% of over 250 industries [6] Zacks Rank System - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), has a strong historical performance, with 1 rated stocks delivering an average annual return of +25% since 1988 [5] - Currently, Toast holds a Zacks Rank of 3 (Hold), indicating a neutral outlook [5]

Core Insights - TOST provides software as a service (SaaS) and hardware solutions specifically tailored for the restaurant industry, indicating a focused market approach [1] Company Overview - TOST operates in a competitive landscape with numerous software firms offering point of sale (POS) payment solutions, but only a select few have achieved significant market presence [1]