Tyro Payments: Good Margin of Safety; Downside Risks Manageable

No-moat Tyro remains materially undervalued at current prices. Among various risks, investors may be concerned about potential merchant defections after Kounta—a point of sale partner of Tyro and a subsidiary of Tyro’s Canadian-based competitor Lightspeed—was found marketing Lightspeed’s payment terminals directly to Tyro’s merchants in September 2023. Additionally, transaction volumes may decline due to higher interest rates and inflationary pressures constraining consumer spending. However, we think concerns are overblown and still see value in Tyro, given its superior utility to merchants, which should counter risks.