Needham has lowered its price target on Toast Inc. to $35.00 from $60.00 but held onto a Buy rating, recalibrating its valuation in light of a pullback in sector valuations while continuing to point to the companys operational momentum. The analyst firm said the reduced target reflects recent multiple compression across software and payments names, even as Toasts business showed tangible topline and footprint progress.
Toasts most recent quarterly results illustrated divergent signals. Revenue outperformed expectations, while earnings per share came in below forecasts. Specifically, the company reported fourth-quarter revenue of $1.63 billion versus an expected $1.62 billion, and EPS of $0.16 against a consensus $0.24 estimate, a 33.33% negative surprise on the bottom line. Following the release, the stock traded lower.
Operational metrics were a bright spot. In the quarter Toast added roughly 8,000 net new locations, bringing its total to about 164,000 locations, which represents a 22% year-over-year increase. For the full year, the company recorded net additions of 30,000 locations, its largest annual gain to date. Management signaled an expectation that fiscal 2026 will see higher net location additions than fiscal 2025, driven by growing contributions from retail, enterprise and international segments.
The company has also secured larger customers as it moves up-market, a point Needham highlighted in maintaining a constructive stance. Notable deals include contracts with Papa Murphys, which comprises over 1,000 locations, and Carmines. Needham cited Toasts expanding platform, uptake of its AI product Toast IQ and what it characterized as a disciplined approach to investment as reasons to remain positive on the companys trajectory.
Valuation metrics referenced by analysts remain elevated on a headline basis. Toast currently trades at a price-to-earnings ratio of 61.64, and analysts covering the name expect the company to reach profitability this year, according to available data cited by the research commentary. The updated Needham target sits nearer to a Fair Value assessment that suggests the stock is slightly undervalued at current levels despite a year-to-date decline of 26.39%.
Market reactions and differing analyst views have been evident following the results. Bernstein SocGen Group upgraded Toast to Outperform and kept a $39.00 price target. An analyst at the firm noted the stocks roughly 26% year-to-date decline and a drop exceeding 34% over the past 12 months, attributing those moves to a broader de-rating in software and fintech sectors and to competitive concerns discussed in coverage.
Contextualizing these developments, the companys revenue growth remains strong on a trailing basis, with year-over-year growth of 25.76% over the last twelve months. Needhams decision to pare its target price appears to be a valuation adjustment tied to sector dynamics rather than a reversal of its view on Toasts commercial and product momentum.
Investors will likely weigh the mix of continued customer wins and location expansion against the near-term EPS miss and the influence of sector-wide multiple compression when assessing the stock. Managements guidance around accelerating net location additions into fiscal 2026 and the push into retail, enterprise and international channels represent the primary operational levers cited for future growth.