Mizuho ups Toast stock to Outperform, says it’s a top 5 retailer by volume; stock up

Shares in Toast (TOST) rose in premarket trading Thursday after analysts at Mizuho Securities upgraded the stock to Outperform from Neutral.

The firm’s analysis projects that by 2025, Toast’s volumes could approach $200 billion, positioning it just behind retail giants such as Walmart (NYSE:) and Amazon (NASDAQ:).

Toast’s shares climbed more than 4% ahead of the opening bell.

As a PayFac primarily serving US restaurants, Toast enables merchants to accept payments through TOST’s master account. According to Mizuho, this setup allows TOST to behave as a large merchant by networks and issuers.

The upgrade comes after a review of recent card network settlement court documents, which revealed that large merchants typically pay significantly lower credit card interchange fees.

Given Toast’s nearly 100% focus on the restaurant sector and approximately 20% market share, Mizuho believes that Toast has the opportunity to revise these fees. According to the firm, Toast may currently be overpaying on credit interchange by 25 to 75 basis points compared to large retailers.

“We see potential opportunity for TOST to renegotiate interchange fees, thereby dramatically lowering its costs of credit processing over the medium-term,” analysts said in a note.

If Toast could lower its credit interchange by 50 basis points, the firm estimates that the company’s EBITDA for 2026 could be double the current consensus, reaching approximately $1.4 billion versus the expected $700 million.

In addition to the rating upgrade, Mizuho has increased its price target for Toast shares to $33 from the previous target of $21.

Furthermore, analysts highlighted that the wording in the settlement documents indicates that franchise retailers such as 7-Eleven and online delivery companies like Grubhub might also benefit from favorable pricing.