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Should You Hold or Sell TOST Stock Before Q2 Earnings Release?
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Key Takeaways
{\"0\":\"Toast will report Q2 earnings on Aug. 5, with EPS expected at 24 cents and revenue at $1.53 billion.\",\"1\":\"TOST expects fintech and subscription gross profit to grow 26-29% year over year.\",\"2\":\"GPV per location is expected to remain down, adding to macro and valuation concerns for TOST.\"}
The Zacks Consensus Estimate stands at earnings of 24 cents and has remained unchanged in the past seven days. The company reported earnings of 2 cents per share in the prior-year quarter. The consensus estimate for revenues stands at $1.53 billion, up 23.4% year over year.
TOST has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters, while missing in the remaining quarter, the average beat being 197.15%. TOST is one of the leading providers of software-as-a-service (SaaS) and hardware solutions focused on the restaurant market.
Image Source: Zacks Investment Research
What Our Model Predicts for TOST
Our proven model does not conclusively predict an earnings beat for Toast this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Healthy sales momentum across Subscription services and Financial Technology solutions segments is likely to have aided TOST’s performance in the second quarter. It expects total subscription and fintech gross profit to grow between 26% and 29% year over year. Adjusted EBITDA is forecast to be between $130 million and $140 million.
The company’s efforts to expand its presence in the core U.S. SMB restaurant market, as well as drive growth across new markets, bode well. TOST registered more than 6,000 net locations in the first quarter of 2025. It ended with approximately 140,000 total customer locations globally at quarter-end, reflecting 25% year-over-year growth. Management expects to post record net adds in the second quarter, and 2025 is now expected to top 2024’s full-year net additions. Toast also reiterated its goal to cross 10,000 locations across enterprise, retail and international markets in 2025.
Toast’s AI-powered tools are positioning it to stay ahead of the curve in restaurant technology. Sous Chef, its AI assistant, is designed to support restaurant operators. Building on this, it has developed ToastIQ, an AI-powered intelligence engine that combines restaurant expertise, data and AI to enhance its platform. In the last reported quarter, adopters, such as Mission Boathouse in Massachusetts and Felipe’s Taqueria, experienced a positive impact. Mission Boat House achieved a 6% higher average order volume through the menu upsell tool, powered by ToastIQ. Felipe’s Taqueria witnessed a 10 times return on ad spend through the use of TOST’s AI-powered advertising offering.
However, management highlighted that it was closely monitoring the macro environment and emphasized restaurants' ability to navigate macro challenges. Despite Toast’s confidence, the restaurant industry is still highly sensitive to consumer spending, labor inflation and supply chain volatility. A consumer downturn or cost pressures could reduce restaurant spend on technology, thereby impacting TOST’s performance.
Decline in Gross Payment Volume or GPV per location is another problem, as it implies lower average transaction volumes. TOST’s overall GPV surged 22% year over year to $42 billion in the first quarter, but GPV per location declined 3% year over year. TOST added that it expects GPV per location to remain down in a similar range in the second quarter. Increasing costs and stiff competition remain additional concerns.
TOST Stock Outpaces Industry
TOST shares have gained 12.9% in the past six months, outperforming the Internet Software market and the Zacks Computer & Technology sector’s growth of 0.6% and 6.8%, respectively. The S&P 500 Composite has returned 2.5% over the same time frame.
Price Performance
Image Source: Zacks Investment Research
TOST has underperformed its peers (within the POS space) like Block (XYZ - Free Report) and Lightspeed (LSPD - Free Report) . Block and LSPD have lost 13.5% and 15.2%, respectively, while tech giant Oracle (ORCL - Free Report) , which has a huge presence in the POS space, is up 42.4% over the same time.
TOST Trades at a Premium
TOST stock is also not so cheap, as its Value Style Score of F suggests a stretched valuation at this moment. TOST is quite expensive, with the stock trading at a premium with a price/book multiple of 13.89X compared with the industry’s 6.74X.
Image Source: Zacks Investment Research
Block, Lightspeed and Oracle are trading at a 12-month price/book multiple of 2.12X, 1.10X and 32.74X, respectively.
TOST’s Investment Considerations
Despite solid topline growth and strong momentum in subscription and fintech segments, Toast’s stretched valuation, declining GPV per location, and exposure to macro risks raise red flags. Weak consumer trends or spending cuts could directly pressure performance. Given these risks and limited near-term upside, investors could benefit from offloading TOST ahead of the second quarter results. Investors looking to invest should wait for a better entry point.
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Should You Hold or Sell TOST Stock Before Q2 Earnings Release?
Key Takeaways
Toast, Inc. (TOST - Free Report) is set to report second-quarter 2025 results on Aug. 5.
The Zacks Consensus Estimate stands at earnings of 24 cents and has remained unchanged in the past seven days. The company reported earnings of 2 cents per share in the prior-year quarter. The consensus estimate for revenues stands at $1.53 billion, up 23.4% year over year.
TOST has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters, while missing in the remaining quarter, the average beat being 197.15%. TOST is one of the leading providers of software-as-a-service (SaaS) and hardware solutions focused on the restaurant market.
Image Source: Zacks Investment Research
What Our Model Predicts for TOST
Our proven model does not conclusively predict an earnings beat for Toast this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
TOST has an Earnings ESP of +1.70% and a Zacks Rank #4 (Sell) at present. You can see the complete list of today’s Zacks #1 Rank stocks her
Factors to Focus on Ahead of TOST’s Q2 Earnings
Healthy sales momentum across Subscription services and Financial Technology solutions segments is likely to have aided TOST’s performance in the second quarter. It expects total subscription and fintech gross profit to grow between 26% and 29% year over year. Adjusted EBITDA is forecast to be between $130 million and $140 million.
The company’s efforts to expand its presence in the core U.S. SMB restaurant market, as well as drive growth across new markets, bode well. TOST registered more than 6,000 net locations in the first quarter of 2025. It ended with approximately 140,000 total customer locations globally at quarter-end, reflecting 25% year-over-year growth. Management expects to post record net adds in the second quarter, and 2025 is now expected to top 2024’s full-year net additions. Toast also reiterated its goal to cross 10,000 locations across enterprise, retail and international markets in 2025.
Toast’s AI-powered tools are positioning it to stay ahead of the curve in restaurant technology. Sous Chef, its AI assistant, is designed to support restaurant operators. Building on this, it has developed ToastIQ, an AI-powered intelligence engine that combines restaurant expertise, data and AI to enhance its platform. In the last reported quarter, adopters, such as Mission Boathouse in Massachusetts and Felipe’s Taqueria, experienced a positive impact. Mission Boat House achieved a 6% higher average order volume through the menu upsell tool, powered by ToastIQ. Felipe’s Taqueria witnessed a 10 times return on ad spend through the use of TOST’s AI-powered advertising offering.
However, management highlighted that it was closely monitoring the macro environment and emphasized restaurants' ability to navigate macro challenges. Despite Toast’s confidence, the restaurant industry is still highly sensitive to consumer spending, labor inflation and supply chain volatility. A consumer downturn or cost pressures could reduce restaurant spend on technology, thereby impacting TOST’s performance.
Toast, Inc. Price and EPS Surprise
Toast, Inc. price-eps-surprise | Toast, Inc. Quote
Decline in Gross Payment Volume or GPV per location is another problem, as it implies lower average transaction volumes. TOST’s overall GPV surged 22% year over year to $42 billion in the first quarter, but GPV per location declined 3% year over year. TOST added that it expects GPV per location to remain down in a similar range in the second quarter. Increasing costs and stiff competition remain additional concerns.
TOST Stock Outpaces Industry
TOST shares have gained 12.9% in the past six months, outperforming the Internet Software market and the Zacks Computer & Technology sector’s growth of 0.6% and 6.8%, respectively. The S&P 500 Composite has returned 2.5% over the same time frame.
Price Performance
Image Source: Zacks Investment Research
TOST has underperformed its peers (within the POS space) like Block (XYZ - Free Report) and Lightspeed (LSPD - Free Report) . Block and LSPD have lost 13.5% and 15.2%, respectively, while tech giant Oracle (ORCL - Free Report) , which has a huge presence in the POS space, is up 42.4% over the same time.
TOST Trades at a Premium
TOST stock is also not so cheap, as its Value Style Score of F suggests a stretched valuation at this moment. TOST is quite expensive, with the stock trading at a premium with a price/book multiple of 13.89X compared with the industry’s 6.74X.
Image Source: Zacks Investment Research
Block, Lightspeed and Oracle are trading at a 12-month price/book multiple of 2.12X, 1.10X and 32.74X, respectively.
TOST’s Investment Considerations
Despite solid topline growth and strong momentum in subscription and fintech segments, Toast’s stretched valuation, declining GPV per location, and exposure to macro risks raise red flags. Weak consumer trends or spending cuts could directly pressure performance. Given these risks and limited near-term upside, investors could benefit from offloading TOST ahead of the second quarter results. Investors looking to invest should wait for a better entry point.