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Toast Inc. shares continue to crumble in the wake of a mixed earnings report that’s prompted questions about the restaurant-technology company’s business drivers.

While Toast’s
TOST,
-3.25%
results and outlook largely met or exceeded consensus expectations Thursday morning, some analysts are worried about the degree to which lending activity affects Toast’s growth, the pace of overall growth going forward.

See more: Toast’s stock dives after earnings as outlook ‘may not meet investor enthusiasm’

Shares of Toast plunged 22.8% in Thursday trading to log their largest single-day percentage decline on record, and they were on pace to fall another 3% Friday after SMBC Nikko Securities America analyst Andrew Bauch cut his rating on the name.

“We can confidently say that TOST delivered the most impressive results vs any name in our coverage in 2022,” he wrote. “While detractors would point to mixed messaging each quarter, the consistency and magnitude of upside surprises gave the bulls the upper hand. After TOST’s 4Q print, we’re less confident in that trend continuing, and believe the bears have credible reasons to be skeptical.”

The company’s full-year revenue outlook of $3.57 billion to $3.66 billion, while in line with the consensus view, was “considerably lower than buy-side models,” he wrote.

Bauch also noted that Toast Capital, a segment of the business that offers financing to restaurants, represented a greater portion of company gross profit in the fourth quarter than in the third quarter.

“While we agree that investing in Toast Capital is the right [long-term] strategic decision, we also sympathize with credit-conscious investors who are less enthused if quarterly beats are driven by a lending business,” he wrote, in downgrading Toast’s stock to neutral from outperform Friday.

Baird analyst David Koning also expressed some concerns in a Thursday note to clients.

“While Q4 beat, it was as smaller beat than in recent quarters, and growth from
Toast Capital has been more of a help the past couple quarters,” he wrote. “We like the growth and the theme a lot, but could see restaurant volumes slow at some point (inflation has been a nice help), and worry a bit about the TAM [total addressable market] longer term.”

He has a neutral rating on Toast shares, along with a $24 target price.

Morgan Stanley’s Josh Baer, meanwhile, viewed Toast Capital more positively.

“Toast Capital is not only additive to the bottom-line, but also has an underappreciated compounding benefit for Toast as restaurants use the capital to make more money processed through Toast Payments,” he said, as the restaurants could boost their capacity with the financing.

Baer has an overweight rating on the stock, though he cut his price target by a dollar to $29.

Toast shares were up almost 45% on the year prior to the Thursday morning report, but they’ve given up most of those gains in the past two sessions. They’re now up about 8% on a year-to-date basis.

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