Hedge fund ValueAct Capital Management has more than doubled its stake in Toast Inc. (TOST), a cloud-based point-of-sale platform serving the restaurant industry, signaling confidence in the company's fundamental business amid broader SaaS sector weakness. The investment move comes as Toast continues to demonstrate resilience in customer acquisition, adding 8,000 net new locations during the fourth quarter and expanding its customer base to approximately 164,000 restaurants.
Toast's valuation metrics have become more attractive following recent market corrections in software stocks. Based on 2026 guidance projecting $2.3 billion in annual recurring revenue (ARR), the company trades at 6x enterprise value-to-ARR, a discount to historical SaaS multiples. This valuation reflects a significant market opportunity, as more than 700,000 restaurants across the United States continue to operate on legacy systems, presenting substantial room for customer migration and market penetration.
The heightened institutional investment activity underscores investor appetite for profitable SaaS companies with substantial addressable markets and proven growth trajectories, particularly as valuations in the sector have normalized from pandemic-era peaks.