Saturday, May 11, 2019

A Current AIM Small Cap Equity Holding: Green Dot Corporation (GDOT, $66.68): “The Growing Green Machine” By: Matthew Vieth, AIM Student at Marquette University


Green Dot Corporation (GDOT, $66.68): “The Growing Green Machine”
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 Corporation (NYSE:GDOT) operates as a financial technology leader and bank holding company. It engages in the provision of prepaid cards, debit cards, checking accounts, secured credit cards, payroll debit cards, etc.

• Continued growth and expected future revenue growth of 13% in 2019.

• Strong client relationships with major market leaders which boost operating revenue and continue to grow year over year.

• Low price relative to anticipated future growth creates an excellent opportunity for gains to investors.

Key points:

Green Dot Corporation over the past year has produced strong returns and continues to show strong growth potential for investors. This performance has come from its strategic plan which emphasizes customer satisfaction and branding itself as a bank different from the rest. This has led to strong sales growth which is expected to increase by 13% in 2019 with earnings per share anticipated to be $3.60, representing roughly a 61% growth from 2018. Further, GDOT’s price is undervalued for the level of output and growth it continues to achieve.

Aside from its strong customer service, Green Dot Corporation’s strong growth also comes from its Banking as a Service (BaaS) platform. This platform contributes heavily to GDOT’s active card total and revenue as it continues to add new clients to the platform. One of these major clients is Walmart which has contributed over 40% of GDOT’s total operating revenues in 2015, 2016, and 2017. This relationship as well as other continue to provide excellent sources of revenue for GDOT that continue to grow in size year over year leading to excellent opportunities for GDOT going forward.

What has the stock done lately?

Over the past month, GDOT’s stock price has increased roughly 8% in part from its continued partnerships with Walmart and other, plus its excellence in customer service. This growth comes after a price decline of 20% during February which makes the stock an attractive buy opportunity for investors.

Past Year Performance:

Over the past year, GDOT has grown roughly 8% from $62 to $66.68. The stock had more volatility than normal thanks in part to the market correction in late 2018 and an analyst target price decrease that hurt the stock in late February but rebounded into positive gain territory. The strong growth rate of GDOT and its client relationships have helped shaped this business over the past year and will reap further benefits from this over time.




Source: FactSet

My Takeaway:

With an emphasis in customer service and strong growth with impressive revenue history, Green Dot Corporation has positioned itself well among other competitors. The banking industry is being disrupted by technology and customer expectations are increasing, meaning only the most adaptive businesses in the banking industry can survive. This is what makes GDOT such an attractable opportunity because of its ability to adapt and meet customer needs while also growing sales.


Source: FactSet

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