Toast Is Down 25% in 2026. Is This a Once-in-a-Lifetime Buying Opportunity?

Key Points
Toast stock was the victim of its association with three tough sectors.
However, its long-term growth story in unchanged and the stock is attractively valued.
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Toast (NYSE: TOST) is at the intersection of three hard-hit sectors thus far in 2026: software, payments, and restaurants. The S&P North American Technology Software Index was down nearly 25% in the first quarter, while the Nasdaq CTA Global Digital Payments Index sank 20% and the S&P 500 Restaurants Sub-Industry Index fell 5%. Against that backdrop, it's not surprising the stock lost a quarter of its value in the first quarter, as it was hit from all sides.
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However, nothing fundamentally changed with the Toast growth story. The company is still adding a lot of new restaurant locations, venturing into adjacent categories (like chains and food stores), and expanding internationally. Many restaurants are still on legacy platforms, so the runway for growth in Toast's core clientele of small and medium-sized U.S. restaurants remains large.
Success is linked its customers
From a software-as-a-service (SaaS) stock perspective, the company is in a very niche market. It's very unlikely to be disrupted by artificial intelligence (AI). Its restaurant customer base doesn't tend to be particularly tech savvy, so they aren't going to vibe code their own platforms, and it isn't a seat-based-heavy business.
Meanwhile, once a restaurant selects Toast, it becomes very ingrained in both daily workflow and payment processing. Toast is also embracing AI to help its customers grow their businesses and become more efficient, while opening new revenue streams for itself.
At the same time, Toast's success is closely linked to that of its restaurant customers. The company gets a piece of every credit card transaction, so the more its customers grow their revenue and succeed, the better it is for Toast. This does expose it to consumer spending trends, although it also gives Toast a natural boost through price inflation.
Toast is still early enough in its journey, however, that unless there are major spending shifts, it can continue to grow through nicely through tougher consumer periods.
Is the Dip in Toast stock a generational buying opportunity?
I wouldn't say Toast is a generational buy following its pullback, but I do think it is a great stock to add here. This is still a high-growth company increasing its annual recurring revenue (ARR), which for it is its subscription revenue and payment gross profits, by a low- to mid-20% clip. Meanwhile, its valuation has become very attractive in my view.
Given the low gross margins of the company's payments business, it is better to use ARR instead of revenue when valuing the company, as a price-to-sales (P/S) ratio makes its business look cheaper than it is compared to pure software companies. Based on a forward enterprise value-to-ARR multiple, the stock trades at around 6 times. Given its growth, it could easily command a 10 times multiple, which would give you a $42 stock. That is a great potential return, and why Toast is a stock I'd be buying here.
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Geoffrey Seiler has positions in Toast. The Motley Fool has positions in and recommends Toast. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.