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A few weeks ago I bought into Toast (TOST), at about $25 cost average. And I want to share my thesis openly here for feedback
**WHAT TOAST ACTUALLY DOES**
Running a restaurant is chaos. You've got orders coming in from the front, staff scheduling in the back, payments to process, inventory to track, and payroll to run. Toast is the platform for all the fragmented processes that a cafe or restaurant has (e.g staffing, payments, payroll, inventory, analytics). As an owner, you get to focus on your core value: providing great food and service.
But, it's still a SaaS, is there hope for it?
The core product is their point-of-sale system, which is vertically integrated. Toast handles payments, online ordering, DoorDash and Uber Eats integrations, inventory tracking, staff scheduling, tip distribution, and payroll. As an owner, you stop managing software and start managing your restaurant. This is a multi-million dollar investment even with AI to spin up all these services and catch up to all the edge cases, bug fixes and embedded workflows that Toast has created
**THE PRODUCT IS STICKY & WHY CUSTOMERS STAY**
Once a restaurant is on Toast, leaving is painful. You'd have to retrain every employee, migrate your data, rebuild your integrations, and start over. That friction is intentional and it's Toast's biggest competitive advantage.
The Reddit reviews tell the story better: "*I love Toast... one of the real kickers is all of the extras and integrations."*
And from a multi-location owner: "*I have 2 restaurants on Toast, 1 on Clover, 1 on Lightspeed. Toast is by far the most user friendly."*
The anecdotal evidence is qualitative, now let's move to the quantitative: Toast now sits in 164,000 locations and processed $195B in payments in FY2025. The bigger the network gets, the more data Toast has to train its AI tools:
* predictive analytics
* menu recommendations
* staffing suggestions
This makes the platform more valuable, which attracts more restaurants. That's the flywheel. Toast becomes an ever-present partner during the every day chaos for the restaurant manager and onwer.
**THE NUMBERS**
Toast had a strong 2025.
* Revenue hit $6.2B, up 24% year over year.
* GAAP net income came in at $342M compared to just $19M the year before.
* Adjusted EBITDA more than doubled to $633M.
Growth saw a slight slowdown from 26% to 20-24% (depending on the metric you look at) but the market overly punished it. At $29 a share and a $17B market cap, you're paying \~2x forward Price-to-sales & \~20x Price-to-earnings.
As the great investor Peter Lynch has said: *"Because of compounding, a 20 percent grower with a P/E of 20x is a better investment than a 10 percent grower selling at a P/E of 10x."*
**BULL CASE**
Three policy tailwinds from the current administration are worth watching for Toast specifically. The no-tax-on-tips policy directly improves pay for servers and kitchen staff. In an industry where turnover is brutal and scheduling is a constant headache, anything that improves retention has real operational value for restaurant owners and makes Toast's payroll and scheduling tools more sticky.
Lower energy costs from deregulation matter more for restaurants than most businesses. Kitchens run hot, refrigeration runs constantly, and energy is one of the largest overhead line items. If utility costs fall, margins improve and marginal restaurants stay open instead of closing which protects Toast's existing location base.
Any broad consumer stimulus, whether a tax rebate or direct payment, puts more discretionary dollars in people's pockets. Restaurants are one of the first places that money goes. More dining spend means more GPV flowing through Toast's payment rails, which is a direct revenue driver.
**THE BEAR CASE**
The recession risk is REAL and it's the biggest one. Toast's revenue is tied to restaurant spending, which is tied to consumer confidence. If the economy slows, restaurants close, new locations stop signing, and that 24% growth rate compresses fast. The business is fundamentally CYCLICAL even if the platform is sticky.
Competition is fierce and well-funded. Clover, Square, Lightspeed, and Shift4 are all pitching the same restaurants.
The sunk cost dynamic works in Toast's favor once a restaurant is locked in, but it also works against Toast when a competitor gets there first. Winning the first sale is everything in this market. And at 47x trailing earnings, the market is pricing in continued strong growth. If Toast misses, or guides conservatively, the multiple compresses and the stock gets hit hard even if the underlying business is fine.
**BOTTOM LINE**
If you believe Toast keeps growing at or near 20%, the current valuation is reasonable and the policy tailwinds are a genuine bonus. If growth slows to 15% or below the company becomes expensive fast.
My position is doing great so far, I entered at \~5% of portfolio with <$25 cost-average. If my above core components hold, then I am a long term investor. I'm investing into growth