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With Hot Growth but Thin Margins, Is This Tasty Tech Stock Worth the Risk?
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Toast, Inc.
July 10 – Pre‑market
Ticker: TOST | Sector: Software – Infrastructure / Technology | Market Cap: ~ $25.8B
30‑Second Take
Why now? Things are heating up at Toast, thanks to a strong start to the year. It’s utilizing AI to expand its offerings, which is helping to drive growth at scale.
Earlier this month, Toast was added to the Investor's Business Daily Breakout Stocks Index.
With an almost perfect Composite Rating of 98 out of a top score of 99, it has strong fundamentals, solid sales growth, and high levels of customer demand.
Its sales outlook is another tasty addition to the menu, with the upcoming Q2 earnings report expected to show a 23.45% increase in net sales and a 1,050% year-on-year increase in Earnings Per Share (EPS).
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Trade Setup
Time frame: Swing to medium-term
Edge type: Momentum breakout
Snapshot Table
Metric | Value | Current Stance |
|---|---|---|
Price | $44.63 | Below average |
52‑week range | $22.10 - $46.57 | Average |
Short interest | 6.65% | Average |
Next catalyst | Q2 earnings expected August |
Chart
5-Day Synopsis: The last five trading sessions have seen TOST stock heating up.
On Monday, prices jumped significantly above the 21-day exponential moving average while other technical indicators, including the 50-day moving average, also indicated a rally.
Trading on Tuesday was a little choppy, with the stock closing down 2.88% at $43.54, but a recovery during yesterday’s session (Wednesday) erased those losses.
The price remains near the 52-week high with a collective 4.30% increase in the last five days.
Bull Case
Core thesis: Toast is a SaaS platform for the restaurant industry.
Its products cover every aspect of managing front and back of house, including point of sale, payments, operations, digital ordering and delivery, marketing and loyalty, and team management.
It runs across the entire operation, streamlining management and helping restaurants grow their revenue while delivering flawless guest experiences.
It added more than 6,000 new locations in the first quarter of the year and secured its largest deals to date with Applebee’s and Topgolf.
Catalysts: Toast’s inclusion on the IBD Breakout Stocks Index gave it a surge of momentum.
As a food tech stock, TOST stands out, with inclusion typically reserved for AI chip makers and the like.
Valuation upside: Current analyst price targets for Toast range from a low of $28.00 to a high of $55.00. It’s currently trading just above the average price target of $43.43.
Technical tailwind: Toast’s technical indicators signal an imminent breakout, with a high Composite Rating of 98, a 1.3 up/down volume ratio, a rising 50-day moving average, and a steady position above the 21-day moving average.
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Bear Case
Key risk: The hospitality business, particularly the restaurant sector, is a highly competitive, low-margin industry.
Restaurants are notoriously cost-sensitive customers, meaning Toast’s margins as a supplier are also constrained.
Macro/sector headwinds: Restaurants are especially vulnerable to economic downturns, rising inflation, and labor shortages.
This is even more pronounced for small and mid-sized restaurants (Toast’s bread and butter), which are especially susceptible to any increase in operational costs or downturn in foot traffic due to inflation or recession.
With many facing the risk of closure during economic downswings and declining consumer confidence, Toast could find its core market is notably depleted.
Competitive threat: Toast faces stiff competition from more generalized SaaS and ePOS solutions such as Square.
While Toast has successfully carved out a niche within the restaurant industry, new rivals and even legacy offerings could easily zero in on that space.
The general nature of those rivals could be beneficial in the event of economic pressures, as their business models are based on diversification, making them less reliant on one sector for survival.
Crowded-trade concern: TOST stock generally trades at a high price-to-sales ratio (~5–6× forward revenue typically), which means it’s priced for perfection.
Any miss in earnings, guidance, or subscriber growth could cause a sharp drop in share price due to lofty expectations.
Quick Checklist
✅ Thesis still valid after today’s close
✅ Volume confirms move above key levels
✅ Catalyst date double-checked (July 09, 2025)
Deep‑Dive Links
That’s all for today’s Everyday Alpha. We’ll have a new pick for you every morning before the market opens, so stay tuned!
Best Regards,
—Noah Zelvis
Everyday Alpha