Tyro Payments stock price target raised by UBS on improving trends

UBS has raised its price target for Tyro Payments Limited (ASX:TYR) to AUD1.40 from AUD1.35, reiterating a Buy rating, driven by improving underlying fundamentals despite the company's FY26 gross profit guidance of AUD230-240 million, which implies a modest 7% growth at the midpoint and is slightly below high-end consensus. The upgrade reflects a 5% growth in core transaction value in Q4 FY25, reduced transaction churn, and robust performance in the profitable Health vertical, suggesting potential operating leverage due to a sustainable cost base.

Analysis

UBS has reaffirmed its Buy rating on Tyro Payments Limited (ASX:TYR) and raised its price target to AUD1.40 from AUD1.35, signaling confidence in the company's underlying fundamentals. This bullish stance is maintained despite Tyro's own FY26 gross profit guidance of AUD230-240 million, which implies a modest 7% growth at the midpoint and lands slightly below the high end of consensus estimates. The analyst's conviction is supported by several positive operational trends, most notably a 5% growth in core transaction value in Q4 FY25, a momentum that has reportedly continued into the current fiscal year. Furthermore, UBS highlights reduced transaction value churn over the past six months, solid growth within the profitable core Health vertical, and early signs of a recovery in discretionary channels. A key element of the thesis is Tyro's sustainable cost base, which suggests the company is positioned for significant operating leverage, enabling incremental gross profit to flow efficiently to the bottom line.

Key Decisions for Investors

• Investors should weigh the modest FY26 gross profit guidance against the positive underlying operational trends, such as the 5% transaction value growth and reduced churn, which form the basis of UBS's bullish outlook.
• The potential for significant operating leverage due to a sustainable cost base is a key factor; monitor gross profit and operating expense trends closely, as any top-line outperformance could disproportionately drive profitability.
• Keep a close watch on performance within the core Health vertical and any continued recovery in discretionary channels, as sustained strength in these areas is critical to validating the thesis for the new AUD1.40 price target.