r/wallstreetbetsMar 17, 03:09 PM
My one, of two SaaS recovery bets - TOST, a restaurant tech leader
In Feb I bought into Toast (TOST), at about $25 cost average and am journaling my thesis here for transparency
It's a bet on growth, with full understanding that the risk of recession looms which might hurt the company.
https://preview.redd.it/dw91988edmpg1.png?width=865&format=png&auto=webp&s=9a5b1f1845e564daa525b64cacc1bb0c2947f7aa
WHAT TOAST ACTUALLY DOES
Running a restaurant is chaotic and messy. You've got orders coming in from the front, staff scheduling in the back, payments to process, inventory to track, and payroll to run. Toast is the platform for all the fragmented processes that a cafe or restaurant has (e.g staffing, payments, payroll, inventory, analytics). As an owner, you get to focus on your core value: providing great food and service.
But, it's still a SaaS, is there hope for it?
The core product is their point-of-sale system, which is vertically integrated. Toast handles payments, online ordering, DoorDash and Uber Eats integrations, inventory tracking, staff scheduling, tip distribution, and payroll. As an owner, you stop managing software and start managing your restaurant. Toast as a software is relatively protected as it requires a multi-million dollar investment even with AI to spin up all these services and catch up to all the edge cases, bug fixes and embedded workflows that Toast has created, and that's on top of their enterprise security and low latency
THE PRODUCT IS STICKY & WHY CUSTOMERS STAY
Once a restaurant is on Toast, leaving is painful. You'd have to retrain every employee, migrate your data, rebuild your integrations, and start over. That friction is intentional and it's Toast's biggest competitive advantage.
I browsed Reddit for anecdotal feedback and I think the reviews tell the story better:
"I love Toast... one of the real kickers is all of the extras and integrations."
And from a multi-location owner:
"I have 2 restaurants on Toast, 1 on Clover, 1 on Lightspeed. Toast is by far the most user friendly."
The anecdotal evidence is qualitative, now let's move to the quantitative: Toast now sits in 164,000 locations and processed $195B in payments in FY2025. The bigger the network gets, the more data Toast has to train its AI tools:
predictive analytics
menu recommendations
staffing suggestions
This makes the platform more valuable, which attracts more restaurants which in essence is the the flywheel. Toast becomes an ever-present partner during the every day chaos for the restaurant manager and onwer.
THE NUMBERS
Toast had a strong 2025.
Revenue hit $6.2B, up 24% year over year.
GAAP net income came in at $342M compared to just $19M the year before.
Adjusted EBITDA more than doubled to $633M.
Growth saw a slight slowdown from 26% to 20-24% (depending on the metric you look at) but the market overly punished it. At $29 a share and a $17B market cap, you're paying ~2x forward Price-to-sales & ~20x Price-to-earnings.
As the great investor Peter Lynch has said:
"Be