Tyro Payments Ltd (ASX: TYR) was once a highly successful IPO, soaring from its offer price of $2.75 per share to a record all-time high of $4.50 in just 2 months. However, coronavirus lockdown measures forced many of its EFTPOS terminal customers to temporarily or partially close business, resulting in its share price sliding almost 80% from peak to tough during the share market crash.
But, as the Australian economy is looking to progressively reopen, could it be time to buy Tyro shares?
A swift share price recovery
After hitting a low of just $0.97 per share in March, the Tyro share price has rapidly rebounded. It now sits at a comfortable price level of around $3.50.
Tyro has remained incredibly transparent throughout the coronavirus pandemic, providing investors with weekly updates regarding its transaction values. So far, it has provided the following updates regarding 2020 vs. 2019:
- January: 27% increase
- February: 30% increase
- March: 3% increase
- April: 38% decrease
- May to 15 May: 20% decrease
- Year-to-date: 18% increase
March appears to be the consistent trough across many retail-related companies. The recent Afterpay Ltd (ASX: APT) business update noted that global underlying sales in the second half of March versus the first half of March were 4% lower. However, its sales rebounded strongly in April, up approximately 10% on the second half of March.
I believe the relaxation of social distancing measures will result in a graduate recovery of Tyro’s transaction values. In the company’s prospectus, it cited that SMEs have been the main target size category for its terminals. As at 30 June 2019, Tyro provided payment services to over 29,000 Australian merchants, of which 77% were SMEs and 86% were in the health, hospitality and retail verticals.
Many state governments including New South Wales and Queensland have already acted on stage one, allowing restaurants, cafes and shopping centres to open. Victoria has plans to advance to stage one by 1 June.
Cash is declining as a method of payment in Australia in response to the perceived benefits of card payment such as convenience, rewards and security, and availability of electronic acceptance devices. The use of cash for payments in Australia decreased from 69% in 2007 to 37% in 2016. The coronavirus and fears around transmission through coins, notes and transaction contact is another catalyst and tailwind for card transactions.
The worst may have passed for Tyro and the reopening of the Australian economy, particularly the hospitality and retail sectors, should see a gradual recovery in its monthly transaction volumes. While the Tyro share price has run up significantly in recent times, I believe the business has much more to look forward to.
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Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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