Toast, Inc. (TOST): A Bull Case Theory

We came across a bullish thesis on Toast, Inc. on Capital Curiosity’s Substack by Taylor Nichols. In this article, we will summarize the bulls’ thesis on TOST. Toast, Inc.'s share was trading at $46.52 as of July 18^th. TOST’s trailing and forward P/E were 172.30 and 49.51, respectively according to Yahoo Finance.

Toast Inc. has rapidly evolved from a startup to a $25 billion market cap leader in restaurant technology, serving 140,000 locations with a five-year revenue CAGR of 49% and four consecutive profitable quarters. The company’s sticky all-in-one SaaS platform has become critical infrastructure for restaurants, evidenced by a 117% net revenue retention rate as customers deepen their adoption of Toast’s integrated tools spanning PoS, payments, digital ordering, operations, and AI-powered optimization.

With only 16% penetration of the 860,000 U.S. restaurants, a $15 billion domestic SaaS TAM, and recent enterprise wins such as Applebee’s and Topgolf, Toast has significant runway for growth. The business model combines high-margin subscription revenues with transaction-based payments, and despite hardware-related gross margin drag, scaling offers substantial operating leverage potential.

The shift to profitability and $1.7 billion in ARR position Toast for S&P 500 inclusion, a catalyst that historically drives outsized returns through index fund buying, institutional validation, and visibility gains. Competition remains fierce, with Toast and Square effectively tied for U.S. market leadership, but Toast’s restaurant-specific focus creates deeper integration and higher switching costs. Premium valuations—forward P/E of ~46x and ~5x revenue—leave little room for missteps, and the business remains sensitive to restaurant transaction volumes.

Still, the path to margin expansion and further market share capture underpins the investment case. For growth-oriented investors willing to pay for quality, Toast represents a compelling opportunity with multiple near-term catalysts and durable structural advantages in the ongoing digitization of restaurant operations.

Previously we covered a bullish thesis on Toast, Inc. (TOST) by Nikhs in March 2025, which highlighted the company’s vertical integration, AI-driven product expansion, and disciplined shift toward profitability. The company’s stock price has appreciated approximately by 7.46% since our coverage. This is because the thesis has partially played out. Taylor Nichols shares a similar view but emphasizes S&P 500 inclusion and margin expansion as key catalysts.

Toast, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 64 hedge fund portfolios held TOST at the end of the first quarter which was 63 in the previous quarter. While we acknowledge the potential of TOST as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.