Saturday, December 1, 2018

A Current AIM Program Small Cap Equity Holding: Green Dot Corp. (GDOT) by: Matthew Vieth. "Green Dot Showing Growth"

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.


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