Toast's Topgolf POS Rollout Targets Efficiency Gains Amid Valuation Concerns

What happened

Toast is expanding its point-of-sale system at Topgolf venues, aiming to improve service speed, labor efficiency, and customer spending per visit as traffic recovers. According to the DeepValue report, Toast has demonstrated strong operational execution, with locations growing to ~156k, gross payment volume (GPV) reaching ~$186bn TTM, and a shift to positive net income and free cash flow in 2024-2025. However, the stock trades at elevated multiples, including a P/E of ~79x and EV/EBITDA of ~189x, with a conservative DCF anchor of $7 versus the current price of ~$37, indicating high embedded growth expectations. The report cautions about risks such as sensitivity to restaurant industry cycles, competitive pressure from Square, and significant stock-based compensation diluting per-share value. While this rollout may support Toast's growth metrics, investors should critically assess whether such partnerships can sustainably justify the premium valuation amidst these ongoing challenges.

Implication

The Topgolf POS expansion could drive incremental GPV and annual recurring revenue (ARR), supporting Toast's key financial metrics. However, with the stock already pricing in aggressive growth, even positive developments may have limited upside impact on the share price. Investors need to monitor whether efficiency gains translate into sustained profitability and margin expansion, as highlighted by the DeepValue report's focus on growth durability. The report advises waiting for a pullback or clearer evidence of durable growth before increasing exposure, given the rich multiples and competitive risks. Overall, while operationally positive, this news does not shift the investment case away from the existing wait-and-see approach due to valuation constraints.

Thesis delta

The Topgolf rollout aligns with Toast's strategy to deepen penetration in large venues, potentially bolstering growth metrics like ARR and GPV. However, it does not materially address the core concerns of high valuation, cyclical exposure, or competitive threats identified in the DeepValue report. Therefore, the investment thesis remains unchanged, emphasizing a cautious stance until better risk-reward emerges through sustained execution or valuation adjustments.