Goldman upgrades TOST to Buy, with a $36 target price
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Goldman upgrades TOST to Buy, with a $36 target price
Goldman expects the 2Q26 payments sector backdrop to be stronger than low expectations, and sees TOST benefiting from vertical expansion, AI products, SaaS ARPU growth, payment pricing, and potential upside from V/MA merchant settlement after valuation compression.
- TOST was upgraded to Buy, with a 12-month target price of $36, with valuation based on about 21x EV/EBITDA-SBC for Q5-Q8 estimates.
- Payments stocks have clearly underperformed year-to-date; the 2027 median P/E for large-cap payments peers is about 15x, down from about 19x one year ago, creating a low earnings bar.
- TOST is down about 17% since the start of the year and over 30% in the past 12 months, but Goldman believes its product capabilities, direct-sales customer acquisition model, and expansion into new verticals still support share gains.
- AI marketing products such as Toast IQ Grow could drive SaaS ARPU growth, with core SMB SaaS ARPU potentially accelerating to 6%-7% over time.
- If the V/MA merchant settlement is ultimately reached, a 10-basis-point credit card interchange fee reduction could add about 3% gross profit uplift and about 8% adjusted EBITDA uplift in 2028 for TOST.
Report interpretation
Overview
This report is Goldman’s outlook for the Americas payments technology sector during 2Q26 earnings season, with a key focus on upgrading TOST from Neutral to Buy. The report argues that although payment stocks have recently shown weak performance and valuation compression is significant, consumer spending, U.S. retail activity and card-spend data remain relatively strong. Combined with inflation, low base effects and resilient wage conditions, this gives large-cap payments a higher-than-expected earnings baseline. TOST is the report’s core positive stock, with a raised target price of $36.
Core views
Goldman’s key theses include: first, a tactical positioning and sentiment environment in the payments sector is negative, creating a low earnings bar; second, TOST has clearly underperformed amid SMB payments competition and concerns about hardware and memory costs, but fundamental quality remains high; third, TOST’s new verticals including Retail, International and Enterprise are expected to sustain store and ARR growth, with Retail especially having greater ARPU-accretive impact; fourth, Toast IQ Grow reflects AI product capability and could accelerate SaaS ARPU growth; fifth, the V/MA merchant settlement could lower acquirer costs, and because of bundled pricing, TOST would be among the largest beneficiaries in coverage.
Analysis framework
The report analyzes the payments sector and TOST through a combination of a pre-earnings sector outlook, stock and valuation compression, consumer spending trends, segment and ARPU bottom-up estimates, Bluesky earnings scenario work, merchant settlement impact analysis, and an EV/EBITDA-SBC valuation framework.
Methodology notes
Valuation by multiple of EBITDA after removing stock-based compensation
Goldman uses a roughly 21x EV/EBITDA-SBC multiple on its Q5-Q8 estimate, resulting in a 12-month TOST target price of $36.
Bullish earnings case analysis
The report assumes fintech gross profit improvement from the MDL settlement, subscription ARPU expansion, and higher incremental margin, and evaluates upside with 20-24x EPS multiples.
Store and ARPU bottom-up build
The report separately analyzes location growth and SaaS and fintech ARPU for core SMB, Enterprise, International and Retail verticals to estimate upside versus Street ARR expectations.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- TOST.USCore recommended name, upgraded to Buy
- Strengths
- Strong product capability, effective direct customer acquisition, and growth potential from Retail, International and Enterprise expansion; Toast IQ Grow could push SaaS ARPU higher; the MDL settlement could lift payment gross margin and EBITDA.
- Weaknesses
- Previously affected by SMB payments competition, hardware and memory cost concerns, and software stock pullback; the market remains concerned about the POS business moat.
- Comparison
- Goldman sees TOST as one of the biggest beneficiaries in coverage from the V/MA merchant settlement and believes its valuation is more attractive relative to its growth trajectory.
- Risks
- Intensifying competition, adverse regulation, weaker macro conditions, and underperformance in new vertical execution.
- VConstructively viewed payments name
- Strengths
- Strong U.S. consumer spending, pricing and mix improvement, and World Cup-related event tailwinds in VAS.
- Weaknesses
- Investors may focus on the 2026 deceleration rate and the tougher comparison base in 2027.
- Comparison
- Compared with MA, it is another large payments network in the report with a constructive bias.
- Risks
- Cross-border weakness or consumer slowdown and a rising future growth base.
- MAConstructively viewed payments name
- Strengths
- Strong U.S. consumer spending should support payment volume growth and valuation recovery.
- Weaknesses
- Some cross-border transaction volume has been affected by portfolio losses.
- Comparison
- Like V, it benefits from strong spending, but needs a rebuilding of multiple confidence.
- Risks
- Cross-border growth, travel trends, or guidance below expectations.
- PYPLRelatively constructive but still has structural challenges
- Strengths
- Cost savings and a low base may limit downside; Venmo growth could support SOTP value.
- Weaknesses
- Branded Checkout still faces competitive pressure and remains a significant part of gross profit.
- Comparison
- Its upgrade logic is more focused on segment disclosures, cost savings, and valuation discovery versus TOST.
- Risks
- Persistent weakness in Branded Checkout and slower-than-expected improvement in segment value.
- GPNMore cautious name in the report
- Strengths
- Potential for value discovery from segment-level disclosures.
- Weaknesses
- Aviation and travel-related disruptions may continue into the second half, and guidance implies a higher bar.
- Comparison
- Compared with TOST, GPN is more exposed in the near term to cross-border and travel disruptions.
- Risks
- Second-half revenue acceleration below expectations and persistent travel disturbances.
- FOURMore cautious name in the report
- Strengths
- North American tournament-linked sports exposure may provide some support.
- Weaknesses
- Global Blue and travel-related disruptions are expected to persist through 3Q and weigh on near-term outlook.
- Comparison
- It lacks a clear upgrade catalyst and valuation reset theme unlike TOST.
- Risks
- Travel disruptions, FX headwinds, and slower organic growth.
Key data
- TOST ratingBuy from NeutralGoldman upgraded TOST from Neutral to Buy.
- TOST target price$3612-month target price, based on an EV/EBITDA-SBC multiple of about 21x.
- TOST stock performance-17% YTD; down >30% over last yearThe report says TOST is down around 17% year-to-date and more than 30% over the past year.
- Payments sector valuation compression2027 P/E median ~15x vs ~19x one year agoThe 2027 median P/E of large-cap payments names in coverage has compressed by roughly 20%.
- Potential impact of MDL settlement~3% gross profit uplift; ~8% 2028 adjusted EBITDA upliftBased on assumptions of a 10-basis-point credit interchange fee cut, roughly 70% U.S. volume, and equal credit/debit shares.
- Retail location mix assumption~6% of TOST locations by 2028 vs ~1% in 2024Goldman sees Retail as a more ARPU-accretive vertical.
- ARR upside potential1%-5% above street expectations through 2028Derived from expansion in new verticals and current segment trends.
- Potential TOST IQ Grow impactCore SMB SaaS ARPU growth could reach 6%-7% over timeThe report argues AI-powered marketing products could accelerate software revenue growth.
- Bluesky bull case~19%-42% upsideThe report states the Bluesky case suggests about 19%-42% upside from current shares.
Impact & implications
For investment implications, the report argues that low expectations and strong spending data in payments could improve reactions around 2Q26 reporting. TOST, by contrast, has clearer upside through valuation support, product leadership, vertical growth, AI product momentum, payment fee improvement, and operating leverage. If the MDL settlement is eventually approved and implemented, acquirer-oriented platforms with bundled pricing are likely to benefit the most, while credit-card-issuer-linked fintechs could face pressure.
Risks
- Competition in restaurant and retail POS intensifies further, potentially weakening TOST’s ability to outperform the market.
- Tighter liquidity and payment regulation may limit the company’s ability to sustain high growth.
- A weakening macro environment could reduce consumer spending, increase merchant bankruptcy, and drive customer churn.
- Execution in new verticals such as Retail, International and Enterprise may fall short, leading to weaker growth than expected.
- Hardware and memory cost pressure could affect margin and the realization of operating leverage.
- The V/MA merchant settlement is still in early approval stages, with uncertainty around final approval, implementation timing, and economic impact.
What to watch
- TOST 2Q26 customer acquisition, SaaS ARPU, payment gross margin, and hardware cost guidance.
- Adoption, penetration on the existing base, and pricing progress for AI modules such as Toast IQ Grow.
- Store growth and ARPU maturation speed in new verticals like Retail, International and Enterprise.
- The ultimate approval, implementation pace, and actual interchange-fee impact of the V/MA merchant settlement.
- Whether U.S. retail sales, SMB sales, card spending, and e-commerce spending continue to stay strong in 2Q.
- Payment company filings (V, MA, PYPL, GPN, FOUR) for commentary on 2H26 growth and cross-border and travel-related disruption.