BMO Capital Markets recently began coverage of Toast Inc. (NYSE: TOST), issuing an “outperform” rating and a target price of $45 per share. The analysts highlighted Toast’s strong foothold in the U.S. restaurant technology and payments market, which is expected to drive the company’s growth. Operating in a sector with immense potential, Toast is not only positioned to dominate its core vertical of restaurant services but is also targeting adjacent markets, such as the food and beverage retail sector. This strategic focus is likely to enhance its market share, which is currently estimated at approximately 14% within the 875,000 restaurant locations scattered across the U.S.
A noteworthy attribute of Toast is its comprehensive product offering paired with a well-defined go-to-market strategy, which bolsters its improving unit economics. This positions the company favorably for sustained long-term growth. BMO’s analysts predict that as more restaurants modernize by transitioning away from legacy systems, they will likely adopt Toast’s innovative solutions. The potential international expansion is particularly interesting. Toast is just beginning its journey in key markets such as Canada, the U.K., and Ireland, which collectively present an additional 280,000 locations that could benefit from Toast’s technology. This reflects not just a growth opportunity; it signals Toast’s ambition to emerge as a global player in restaurant technology.
Toast’s strong unit economics are further underscored by a lifetime value to customer acquisition cost (LTV/CAC) ratio exceeding 6x. This is indicative of the company’s ability to efficiently manage its resources while acquiring profit-generating customers. Although the restaurant technology sector faces broader industry pressures, BMO remains confident in Toast’s capacity to achieve stable profitability metrics. Their forecast for Toast’s EBITDA in 2026 is around 5% higher than the consensus, which could indicate substantial upside potential. This positive outlook is attributed to Toast’s anticipated earnings growth of 34% by 2027, a growth trajectory that justifies BMO’s target valuation at approximately 34 times estimated earnings per share.
Recent fluctuations in Toast’s stock price—specifically a roughly 15% decline—are seen as providing an attractive entry point for potential investors. Given the analysts’ considered approach to evaluating Toast’s risk factors, they have established robust EBITDA guidance for 2025, suggesting a well-de-risked investment opportunity. In addition to maintaining their current unit economics, Toast plans to further its product suite and leverage pricing opportunities effectively. All these factors will play a pivotal role in expanding its customer base and solidifying its competitive edge in the market.
Toast Inc. presents an intriguing investment case with substantial room for growth, stable financials, and solid market positioning in the evolving landscape of restaurant technology. The combination of strategic expansion efforts, strong unit metrics, and favorable market dynamics positions Toast as a noteworthy contender for investors looking for robust growth in the technology sector.