Why Toast Stock Is Falling After PayPal Earnings

Toast Inc (NYSE:TOST) shares are sliding Tuesday after PayPal Holdings Inc (NASDAQ:PYPL) posted weaker-than-expected fourth-quarter results and withdrew its long-term financial targets, triggering a sell-off in payment and merchant-technology stocks. Here’s what investors need to know.

• Toast shares are retreating from recent levels. Why are TOST shares down?

PayPal Earnings Miss Sparks Selloff In Fintech Stocks

PayPal reported 4% year-over-year revenue growth to $8.68 billion, below the $8.80 billion Wall Street estimate, and adjusted EPS of $1.23 versus the $1.28 consensus.

The company also announced a CEO transition alongside comments from its CFO highlighting mounting pressure on retail merchants and on lower- and middle-income consumers.

Why Investors Are Linking Toast and PayPal

While their customer bases differ, investors view Toast and PayPal as closely related because both monetize payment volume from small and mid-sized businesses and are highly sensitive to consumer discretionary spending.

PayPal's warning that retail merchants face a tougher backdrop raises concern that restaurant operators on the Toast platform could see slower ticket growth, weaker traffic or higher churn, directly impacting Toast's transaction-based revenue and software upsell opportunity.

Why Toast’s Bearish Trend Signals Caution

Currently, Toast is trading 9.8% below its 20-day simple moving average (SMA) and 20.6% below its 100-day SMA, indicating a bearish trend. Shares have decreased 28.43% over the past 12 months and are positioned closer to their 52-week lows than highs, reflecting ongoing challenges for the stock.

The RSI is at 36.22, which is considered neutral territory, while MACD is below its signal line, indicating bearish pressure on the stock. The combination of neutral RSI and bearish MACD suggests mixed momentum.

• Key Resistance: $34.50
• Key Support: $28.00

How Toast Revolutionizes Restaurant Technology

Toast is an end-to-end technology platform designed to address the complex needs of the restaurant industry. The company generates point-in-time revenue through sales of its restaurant-grade hardware and recurring revenue in the form of take rates on restaurant transaction volume as well as subscriptions to its software solutions.

As of fiscal 2024, the company provided services to 134,000 restaurant locations primarily in the U.S. Toast’s typical customer is a mid-market restaurant generating slightly more than $1 million in revenue annually, making it a significant player in the restaurant technology space.

Earnings Surge: A Game-Changer Ahead?

Investors are looking ahead to the next earnings report on Feb. 12.

• EPS Estimate: 19 cents (Up from 5 cents YoY)
• Revenue Estimate: $1.62 billion (Up from $1.34 billion YoY)
• Valuation: P/E of 71.6x (Indicates premium valuation)

Analyst Consensus & Recent Actions: The stock carries a Buy Rating with an average price target of $44.82. Recent analyst moves include:

• DA Davidson: Neutral (Lowers Target to $36.00) (Feb. 2)
• Oppenheimer: Outperform (Lowers Target to $48.00) (Jan. 12)
• Wolfe Research: Downgraded to Peer Perform (Jan. 8)

Valuation Insight: While the stock trades at a premium P/E multiple, the strong consensus and 280% expected earnings growth suggest analysts view this growth as justification for the 46% upside to analyst targets.

Benzinga Edge Rankings

Below is the Benzinga Edge scorecard for Toast, highlighting its strengths and weaknesses compared to the broader market:

• Value Rank: 28.15 — Trading at a steep premium relative to peers.
• Growth Rank: 96.32 — Strong growth potential in the fintech sector.
• Momentum Rank: 6.33 — Stock is underperforming the broader market.

The Verdict: Toast’s Benzinga Edge signal reveals a classic ‘High-Flyer’ setup. While the Growth rank indicates strong potential, the low Value and Momentum scores suggest caution for investors.

TOST Shares Slide Tuesday Afternoon

TOST Price Action: Toast shares were down 9.45% at $28.53 at the time of publication on Tuesday, according to Benzinga Pro data.

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