Toast’s Rebound: A Quiet Win

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My aunt, bless her, still thinks “SaaS” is a Scandinavian death metal band. I tried explaining it involved software and subscriptions, but she just nodded and asked if they had a tour schedule. It’s a good analogy, actually. These tech companies—they’re all screaming for attention, and then, inevitably, someone gets canceled. Toast (TOST +4.55%), the restaurant software people, had a bit of a scare recently. A little post-earnings dip. It recovered, of course. They usually do. And I, naturally, found myself staring at the charts, wondering if this was the moment to finally be sensible.

Sensible being the operative word. I’ve made a career of not being sensible. My financial advisor—a man who looks permanently disappointed in my life choices—keeps suggesting index funds. Boring, predictable index funds. But then you see something like Toast, adding 8,000 new restaurants in a quarter—30,000 for the year, totaling around 164,000—and you think, maybe a little excitement isn’t such a bad thing. They’re even expanding internationally, and apparently, into food retailers. It’s like they’re trying to be the operating system for everything edible. Which, let’s be honest, is a perfectly reasonable goal.

The numbers, as my advisor insists I look at, were…robust. Q4 revenue climbed 22% to $1.63 billion. Subscription revenue up 28%, fintech up 22%. Gross Payment Volume—GPV, they call it, as if it’s some sort of obscure mineral—rose to $51.4 billion. It all sounds very impressive, but I mostly just pictured mountains of receipts and harried servers. Then there’s Annual Recurring Revenue, or ARR, which jumped to $2 billion. They’re obsessed with ARR. It’s the combination of subscriptions and payment processing profits. Apparently, it’s their “most important metric.” Like a heartbeat, only in dollars. They even managed to increase their payment processing take rate by a minuscule amount—2 basis points—which apparently matters. It’s like finding a nickel under the sofa cushion.

Earnings per share soared from a pathetic $0.05 to a relatively respectable $0.16. Adjusted EBITDA—another acronym I had to Google—jumped 47% to $163 million. It’s all going up. Which is good, I suppose. It’s just…exhausting. All this upward momentum. I’m starting to suspect they’re powered by tiny, highly motivated hamsters on treadmills.

Looking ahead, they’re forecasting $2.27 to $2.30 billion in subscription and fintech gross profit by 2026. A 20-22% growth rate. And adjusted EBITDA of $775 to $795 million. For Q1, they’re projecting $505 to $515 million in gross profit, with EBITDA landing in the $160 to $170 range. It’s a lot of numbers. I started to feel a headache coming on. I needed a nap. And possibly a strong cup of tea.

Is the Stock a Buy?

The thing about Toast is, it’s not trying to solve world hunger. It’s not developing self-driving cars. It’s just helping restaurants take orders and process payments. And in a world increasingly obsessed with artificial intelligence, that feels…comforting. My advisor, who is convinced AI will render us all obsolete, would disagree. He keeps talking about “disruptive technologies.” I prefer things that just…work. Toast seems to do that. They’re even embracing AI tools, but in a measured, sensible way. Apparently, AI agents will be a future growth driver. Which, honestly, sounds terrifying.

From a valuation standpoint, I’m looking at their ARR, projected to be $2.3 billion by 2026. Based on that, the stock trades at an enterprise value-to-ARR multiple of around 6 times. Which, according to my advisor, is “very inexpensive.” He actually said that with a straight face. It makes the stock a buy, even after the post-earnings rebound. I’m still hesitant. I have a deep-seated fear of making money. It feels…unearned. But maybe, just maybe, I’ll take a small position. Just enough to cover a few nice dinners. And a really good cup of tea.

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2026-02-17 11:52