Trump announces trade deal with EU following months of negotiations
On Thursday, RBC Capital Markets adjusted its outlook on Toast Inc. (NYSE:TOST), raising the company’s price target from $40.00 to $45.00 while maintaining a Sector Perform rating. The boost reflects Toast’s strong performance, evidenced by an impressive 66.38% price return over the past six months, and promising expansion into new markets, including international and enterprise sectors. According to InvestingPro data, Toast currently trades at $38.55 with a market capitalization of $23 billion.
Toast’s recent quarter showed significant progress, with a 50% increase in initial average revenue per user (ARPU) for international go-lives in the fourth quarter of 2024. The company demonstrated robust growth with revenue increasing 28.33% year-over-year, though InvestingPro analysis indicates relatively weak gross profit margins at 24.09%. A notable achievement for the company was securing a partnership with Hilton, which encompasses payment solutions. These developments prompted RBC Capital to revise its financial estimates for Toast.
The firm’s updated revenue and adjusted EBITDA estimates for the fiscal year 2025 now stand at $6.12 billion and $516 million, respectively, up from the previous forecast of $6.10 billion and $494 million. Additionally, RBC Capital has set forth projections for fiscal year 2026, anticipating revenues of $7.38 billion and adjusted EBITDA of $709 million.
The revised price target of $45.00 is based on 37 times the firm’s expected enterprise value to adjusted EBITDA for fiscal year 2026, a decrease from the previous multiple of 46 times for fiscal year 2025. This valuation adjustment is supported by Toast’s trajectory in adjusted EBITDA, as noted by the analyst from RBC Capital. InvestingPro’s Fair Value analysis suggests the stock is currently trading slightly above its intrinsic value, with additional insights available in the comprehensive Pro Research Report, which covers over 1,400 US stocks.
The analyst’s commentary highlighted the balance Toast has achieved between investment and margin expansion, along with the positive impact of severe weather on the first quarter of 2025. Despite these challenges, the company’s strategic moves and financial guidance have laid the foundation for the analyst’s optimistic valuation. Toast maintains a healthy financial position with a current ratio of 2.44, indicating strong liquidity to meet short-term obligations.
In other recent news, Toast Inc. has been the subject of multiple analyst updates following its fourth-quarter earnings release. BMO Capital Markets raised its price target for Toast to $48, citing strong fourth-quarter trends and better-than-expected key performance indicators, including recurring gross profit growth and adjusted EBITDA. Similarly, Canaccord Genuity also increased its price target to $48, highlighting Toast’s impressive location growth and market share potential, while maintaining a Buy rating.
Keefe, Bruyette & Woods adjusted their price target for Toast to $42, reflecting positive earnings per share revisions for 2025 and 2026, though they maintained a Market Perform rating. The firm noted that Toast’s recent quarterly performance exceeded expectations, driven by fintech pricing adjustments and strong subscription revenue conversion. Meanwhile, Compass Point lowered its price target to $47 but kept a Buy rating, emphasizing the company’s conservative fiscal year guidance and potential for growth in international markets.
Analysts have noted Toast’s strategic focus on sales and marketing, as well as research and development, as contributing factors to its robust operational health. Despite some tempered forecasts, there is a general consensus among analysts that Toast is well-positioned for continued growth, with several firms expressing confidence in the company’s long-term prospects.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.