BMO initiates Toast coverage with 'outperform,' sets $45 PT

Inveting.com -- BMO Capital Markets has initiated coverage of Toast Inc. (NYSE: TOST), assigning it an "outperform" rating and setting a target price of $45.

Analysts from BMO cited Toast's robust position in the U.S. restaurant technology and payments market as a key factor driving their optimism.

Toast is projected to continue gaining significant market share in its core restaurant vertical as well as in adjacent sectors such as food and beverage retail.

The analysts flagged that Toast's comprehensive product offering and effective go-to-market strategy underpin its improving unit economics, making it well-positioned for long-term growth.

Toast's market share in the U.S. restaurant sector is estimated at about 14%, but BMO sees more room for expansion given the 875,000 restaurant locations in the country, many of which are still using legacy systems.

Internationally, Toast is just beginning to tap into markets such as Canada, the U.K., and Ireland, which together add approximately 280,000 potential locations to its addressable market.

BMO said that Toast's strong unit economics, reflected in a lifetime value to customer acquisition cost (LTV/CAC) ratio exceeding 6x, remain a competitive advantage.

Despite industry-wide headwinds such as gross payment volume pressures, the brokerage expects Toast to achieve stable or improving profitability metrics. BMO's forecast for Toast's 2026 EBITDA is about 5% above consensus, indicating potential upside.

The target price reflects a valuation of around 34 times the firm's estimated 2026 earnings per share, a premium that BMO views as justified given Toast's projected earnings growth of 34% in 2027.

Analysts see additional upside if Toast exceeds expectations in areas such as recurring gross profit per location or maintains its current unit economics, both of which are conservatively modeled in consensus estimates.

BMO also noted that Toast's recent pullback in stock price, approximately 15%, provides an attractive entry point for investors, particularly given its de-risked EBITDA guidance for 2025.

With plans to expand its product suite and leverage pricing opportunities, the firm is expected to capitalize on its competitive advantages while continuing to grow its customer base.

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