Cashless Society Surge Will Drive SME And API Adoption

Key Takeaways

• Tyro's advanced payment infrastructure, deep partnerships, and expansion into untapped markets position it for outperformance in transaction and fee growth.
  
• Integrated banking, AI-driven efficiencies, and entry into new verticals drive strong margin expansion and scalable, high-quality earnings growth.
  
• Rising competition, disruptive payment trends, and higher costs threaten Tyro's market share, margin stability, and ability to achieve sustained revenue and earnings growth.

Catalysts

Engages in the provision of payment solutions and value-add services in Australia.

• Analyst consensus expects expanded payments infrastructure and deep partnerships to support revenue growth, but with the acceleration in API integrations-now spanning over 450 partnerships and next-generation terminals-Tyro is uniquely positioned to outperform by capturing disproportionate share from both established SMEs and new verticals, leading to sustained, above-market transaction volume and fee growth.
  
• While consensus points to margin gains from integrated banking, the launch of Tyro's new core banking platform, combined with a shift to a platform-based fee structure and rapid banking adoption targets (aiming for 20% of gross profit and over 50% front-book attach rates), could drive step-change improvements in margin mix and high-return cross-sell, materially lifting net margin and accelerating earnings beyond forecasts.
  
• Tyro is leveraging significant AI-driven operational advancements in productivity, customer support, and rapid product innovation, enabling superior cost discipline and faster go-to-market cycles, supporting ongoing EBITDA margin expansion and scalable earnings growth as transaction volumes increase.
  
• As Australia's transition to a predominantly cashless society gains momentum, Tyro's entrenched position as an SME-focused, technology-led provider makes it a primary beneficiary of the structural shift to digital payments, underpinning a long runway for transaction value expansion and recurring revenue uplift.
  
• Tyro's entry into sizable new verticals such as automotive, aged care, pet insurance, and unattended devices, where it previously had no share, expands the addressable market by over 40 billion dollars and unlocks new high-barrier segments, with early merchant wins suggesting the potential for multi-year step changes in top-line growth and market leadership.

Tyro Payments Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Tyro Payments compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Tyro Payments's revenue will grow by 9.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 3.7% today to 5.4% in 3 years time.
• The bullish analysts expect earnings to reach A$34.0 million (and earnings per share of A$0.07) by about August 2028, up from A$17.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 33.4x on those 2028 earnings, down from 35.3x today. This future PE is greater than the current PE for the AU Diversified Financial industry at 25.2x.
• Analysts expect the number of shares outstanding to grow by 0.92% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.18%, as per the Simply Wall St company report.

Tyro Payments Future Earnings Per Share Growth

Risks

• Intensifying competition from global tech giants entering the payments space could increase pricing pressure and commoditize Tyro's core services, potentially leading to slower revenue growth and shrinking gross profit margins.
  
• The accelerated adoption of alternative payment methods such as cryptocurrencies, buy-now-pay-later solutions, and account-to-account payments threatens to bypass traditional payment terminals, which may erode Tyro's addressable market and impact future topline revenue.
  
• Tyro's merchant acquisition growth has shown inconsistencies, with core transaction value growth lacking a clear trend for much of FY '25 and declines in hospitality and retail verticals, suggesting ongoing challenges to achieving sustained volume growth and consistent revenue expansion.
  
• Ongoing cost pressures and the need to invest in both innovation and compliance-in the face of increasing regulatory scrutiny-may drive up operating expenses, squeezing net margins and impeding improvement in profitability.
  
• Industry consolidation and advances in embedded finance by software platforms and vertical SaaS providers may reduce the competitiveness of standalone payment providers like Tyro, potentially resulting in market share loss and slower long-term earnings growth.

Valuation

• The assumed bullish price target for Tyro Payments is A$1.7, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Tyro Payments's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$1.7, and the most bearish reporting a price target of just A$0.82.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be A$629.5 million, earnings will come to A$34.0 million, and it would be trading on a PE ratio of 33.4x, assuming you use a discount rate of 7.2%.
  
• Given the current share price of A$1.19, the bullish analyst price target of A$1.7 is 30.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.