Toast Earnings: Strong Quarterly Results Overshadowed by Higher Near-Term Investment; Shares Pricey

Narrow-moat Toast posted a solid fourth quarter, delivering $1.34 billion in sales and $111 million in adjusted EBITDA, in line with our $1.35 billion revenue estimate and topping our $92 million EBITDA forecast. Despite decent quarterly performance, the firm’s pivot toward higher investment and new growth verticals in 2025 leads us to moderate our near-term expectations. Management’s guidance reflects this, with a forecast for 24% growth in non-GAAP subscription services and financial technology gross profit and $520 million in adjusted EBITDA at the midpoints, falling well below our prior expectations for 32% growth and $596 million, respectively. After digesting the results, we plan to revise our estimates to incorporate an uptick in near-term investment and incrementally slower new store additions than we had initially contemplated, resulting in a low-single-digit anticipated haircut to our $27 per share fair value estimate.