Green
Dot Corp. (GDOT, $84.81): “Green Dot Showing Growth”
By:
Matthew Vieth, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary:
• Green Dot Corp. (NYSE:GDOT) Green Dot Corp. (GDOT) is a consumer
financial technology company offering accessible and affordable financial
services to primarily unbanked, underbanked, and unsatisfied groups, as well as
Millennials. GDOT is currently the largest provider of reloadable prepaid debit
cards and reloading services in the United States.
• GDOT’s management team
is under pressure to drive EPS after announcing a six step plan in February,
2018.
• GDOT announced strong
3Q earnings data in 2018 beating EPS expectations by $0.13 per share.
• Management has
indicated that it continues to implement this plan to boost shareholder value
and increase EPS for investors.
• Management’s plan to
boost EPS has also included the proposal for stock repurchases.
Key
points:
Green Dot Corp. in the last three quarters has posted
strong sales growth percentages with 24.5%, 16%, and 14.5% respectively. Tax
season is the result of the larger 24.5% quarter as is expected. In addition,
other key metrics such as the number of active accounts grew by 3% totaling
5.43 million active accounts. In each of the past 9 months, the number of cash
transfers also grew by 9% in part to new mobile banks features. Continued
growth and consistent performance shows evidence that GDOT can continue to grow
EPS as planned by management.
Purchases of other
businesses were made by Green Dot Corp. in 2017 and early 2018 such as the
purchase of UniRush LLC for $142.2 million. These purchases have enabled Green
Dot Corp. to offer new features in their mobile banking and increased peer to
peer services. Green Dot Corp. has expanded their peer to peer services by
enabling clients to use Apple Pay in connection with their Green Dot account.
Making transfers more readily available has increased the flow of transactions
at Green Dot and have increased transactional revenues. New mobile banking
features give more control and easier usability to clients which have added to
overall growth. As previously mentioned, account totals have grown by 3% and
transactions have increased 9% in the past 9 months in part due to these new
features and additions.
What
has the stock done lately?
Today, the stock price of
GDOT remains at the price point of $84.81 which as the same as three months
ago. Although the price may be similar GDOT’s stock price has been volatile in
that three month period. The stock hit a 3 month low of $72.50 following the
large October correction. The stock climbed back to $78 before market news on
November 7th of GDOT beating EPS expectations by $0.13 per share
pushing the stock as high as $92.50 before settling at $84.81. The volatile
change of the stock price seems realistic given market corrections and positive
market news which affected prices.
Past
Year Performance:
GDOT has increased 35.7% in value over the
past year and is still growing. This continued increase in value is coming from
their ability to acquire new customer accounts and offering new mobile banking
features which driver users experience and transaction value. The recent
volatility of the stock comes from market corrections and positive quarter
news.
Source:
FactSet
My
Takeaway:
GDOT has continued to
report strong quarterly earnings while continuing to grow its consumer base and
transaction activity. Along with support from its recent acquisitions, I expect
GDOT to continue its growing rate and surpass the current market price of $84.81.
Management has shown a desire to increase EPS and have shown positive results
month after month as previously shown. Based upon these facts and the quality
of management, the AIM Portfolio should increase its holdings of Green Dot
Corp.
Source:
FactSet
