Wells Fargo lifts Toast stock rating, targets $39 from $30

On Thursday, Wells Fargo (NYSE:WFC) analyst Jeff Cantwell upgraded Toast Inc. (NYSE: NYSE:TOST) stock rating from Underweight to Overweight, setting a new price target of $39.00, up from the previous $30.00. The upgrade comes as Toast's stock trades at $34.38, having delivered an impressive 49.61% return over the past year. Cantwell's upgrade is based on the company's significant market share gains within the U.S. restaurant sector over the past five years. Toast's market share has jumped from 3% in 2019 to over 15% by the end of 2024, supported by strong revenue growth of 28.33% in the last twelve months.

The analyst highlighted Toast's expansion efforts and their increasing credibility, projecting a potential upside of more than 5% in Gross Profit (GP) for 2026 and 2027. These projections utilize conservative penetration assumptions in new market areas. With a current gross profit margin of 24.09% and expected revenue growth of 22% in FY2025, Wells Fargo views Toast's ability to secure substantial Enterprise deals in the coming years as a key driver of the company's growth narrative. InvestingPro data reveals that 8 analysts have recently revised their earnings estimates upward for the upcoming period, suggesting growing confidence in Toast's business model.

Cantwell pointed to Toast's recent acquisition of Potbelly (NASDAQ:PBPB)'s, which ranks 99th among U.S. restaurant chains, as proof of the company's compelling value proposition for larger Enterprise customers. This deal is seen as a testament to Toast's appeal and effectiveness in gaining market share within this segment.

The analysis also includes an estimate that Enterprise deals could potentially add more than $3 billion in Gross Payment Volume (GPV) in 2025, which would represent a 1% share gain. For the years 2026 through 2028, the anticipated increase in GPV could reach $6-7 billion annually, accounting for an additional 2% in market share gains.

Toast Inc.'s stock upgrade by Wells Fargo reflects a positive outlook on the company's strategic positioning and potential for continued growth in the restaurant technology market. For investors seeking deeper insights into Toast's enterprise strategy and growth metrics, InvestingPro offers comprehensive analysis through its Pro Research Report, which is part of its coverage of over 1,400 US stocks. The platform provides detailed financial health scores and additional ProTips that can help investors make more informed decisions about this rapidly growing restaurant technology leader.

In other recent news, Toast Inc. reported its fourth-quarter earnings, which exceeded DA Davidson's expectations, leading to a price target increase from $38.00 to $42.00, while maintaining a Neutral rating. The company's revenue was 2% higher than forecasted, and its adjusted EBITDA surpassed expectations by 16%, prompting an upward revision of EBITDA forecasts by 5%. DA Davidson acknowledged Toast's guidance for 2025, projecting significant growth in Non-GAAP FinTech & Subscription gross profit and adjusted EBITDA. Meanwhile, UBS maintained a Buy rating with a $47.00 price target, highlighting Toast's potential to expand its market presence across international and enterprise locations by 2025.

Piper Sandler reiterated a Neutral rating with a $35.00 price target, noting Toast's strong growth in subscription and financial products gross profit and a substantial EBITDA margin expansion in 2024. The firm anticipates further investments in international markets and the food and beverage sector, which may impact margin expansion but still project significant growth. Evercore ISI initiated coverage with an In Line rating and a $29.00 price target, expressing concerns over Toast's valuation and potential near-term challenges, such as a slowdown in average revenue per user. Bernstein analysts foresee Toast facing high single-digit negative revisions in gross profit and double-digit EPS revisions in a recession scenario due to its exposure to discretionary spending and new business formation. These recent developments provide investors with insights into Toast's financial performance and strategic direction amidst varying analyst perspectives.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.