Can Toast Stock Double Again in 2025?

Toast (NYSE: TOST) stock nearly doubled last year, and it's off to a strong start in 2025. It's already outdoing the S&P 500, which has had smaller gains so far this year.

2024 was a dramatic year for Toast, since it reported two quarters of net profitability while still delivering high growth. Can it offer similar gains for investors in 2025?

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A market leader in its industry

Toast provides comprehensive restaurant management solutions that include software-as-a-service, with subscriptions and payment processing, as well as hardware such as point-of-sale devices and kitchen displays. It connects all of a location's operations and can save customers time and money.

It's catching on with the restaurant industry, which could use a change from pen-and-pad ordering. Toast had 52,000 locations when it went public just over three years ago, and it's more than doubled to 127,000 at the end of the 2024 third quarter. Growth has been strong and steady, with 7,000 new locations in the quarter.

Management estimates that it has about 13% of U.S. restaurant locations right now, which is an excellent position from the standpoint of being an industry leader that still has a lot of room to expand. That number doesn't include all of its growth opportunities outside of getting more clients, so it has a much lower percentage of its total addressable market. It's aiming to grow in several ways.

One is capturing market share. Toast sees itself as differentiated from other platforms that offer similar services because it's solely focused on restaurants, in contrast to companies like Block that service many industries, and because it offers a wider set of customer service options. It's still benefiting from the organic growth of restaurants using old technology jumping onto its cloud-based platform, and winning over customers from other platforms.

Second, it's adding new features and services to upsell customers and get them to engage at higher rates and pay for more services. Some of its newer platform features are digital ordering and platform by type, like capabilities for pizzerias and bakeries.

Next, it's expanding into markets. It's just getting started in international, where it has only 2,000 locations.

Finally, it recently launched a new product geared toward grocery stores and supermarkets. It's a similar platform that unifies operations in a complex industry to streamline management and save time and money.

Can it keep up its high growth rates?

Although there's still a long growth runway, the likelihood is that rates will keep decelerating as it gets bigger. In its favor, though, it has become profitable at scale, which is the goal, That's a reason to have confidence that it can grow and become a viable long-term success. Consider growth rates over the past five quarters.

Data source: Toast quarterly reports. Growth is year over year. ARR = annualized recurring run rate.

This is the kind of pattern you want to see in a company that's worth investing in for the long term.

Valuation is also catching up

Toast went public in 2021 at the end of a strong bull market, and the stock quickly fell from early highs. It's down 36% from its first-day closing price, even after almost doubling last year.

Does that mean it just has more room to climb back up? Not if the previous price was bloated due to risky confidence. Valuation matters when assessing how high a stock can go, even if the underlying business is healthy and there are high growth opportunities.

Today, Toast stock trades at a forward price-to-earnings ratio of 32, which doesn't look unreasonable for a company still growing at its rates and that's become profitable. Toast stock looks like a good deal right now, but if it were to double again, the valuation would balloon, too. Investors can feel comfortable investing in Toast stock, but not for the chance to double in 2025. Rather, it should reward investors with steady gains this year, and it looks like a solid long-term bet.

Should you invest $1,000 in Toast right now?

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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Block and Toast. The Motley Fool has a disclosure policy.