By:
Nathaniel D’Amato, 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 (CDOT) is a financial
technology innovator currently standing as the largest provider of prepaid
debit cards in the United States. GDOT operates out of Account Services and
Processing and Settlement Services. Account Services offers an omni-channel
distribution platform including reloadable cards. The Processing and Settlement
Services segment includes services that specialize in processing the movement
of funds and tax processing. The company was founded by Steven W. Streit in
1991, and is headquartered in Pasadena, CA.
•Offers easily accessible financial services on mobile platforms with apps compatible with iOS and Android operating systems
• Has very large and profitable clients including Apple, Uber, PayPal, Walmart, Walgreens, and 7-Eleven
• Strong Q2 2018 results continuing the momentum
Key points:
Green Dot Corp. is the largest provider of reloadable prepaid cards and has dominated the industry for prepaid cards and online payment platforms in recent years.
The user-friendly
services provided by Green Dot include GoBank, allowing for convenient checking
account access. Green Dot has developed a highly profitable business model
providing checking account services that attract customers through
user-convenience. Allowing GDOT to cut the costs of providing perks or paying
interest. GDOT has grown sales by an average of 26% the past 5 quarters. This
growth is due to very profitable partnerships with companies like Uber and Apple.
Green Dot’s Q2 ’18 results lived up to expectations. Total operating revenue grew by 28% YoY reaching $225.5 million. A big driver in this growth was the acquisition of UniRush in 2017 but organic revenue is still a primary driver with 12% growth YoY compared to only 6% the same period last year.
What
has the stock done lately?
Since May, GDOT’s stock price has been on a bullish streak with no signs of slowing down. The stock price only experienced a slight dip in March but recovered immediately. The prepaid card business is growing their customer base and this is reflected in GDOT’s higher profit margins and free cash flow generation growing by over 46% in the last 12 months.
Past
Year Performance:
The price of Green Dot’s stock has grown by over 47% since the start of 2018; growing from $59.58/share reaching over $87/share. GDOT had a very strong performing year, topping consensus earnings the past 10 out of 12 quarters. Only 1 quarter missed and the remaining quarter matched expectations.
The price of Green Dot’s stock has grown by over 47% since the start of 2018; growing from $59.58/share reaching over $87/share. GDOT had a very strong performing year, topping consensus earnings the past 10 out of 12 quarters. Only 1 quarter missed and the remaining quarter matched expectations.
Source:
FactSet
My
Takeaway:
Green Dot Corp. is likely to remain profitable and will continue growing due to the accelerating popularity of mobile friendly financial services. The increase in urbanization and strong demand arising from millennial customers complements GDOT’s up-to-date fintech capabilities. Also, non-cash payments volume is expected to increase at 5 year historical CAGR of 10.9% by the year 2020, according to BNP Paribas. These factors should allow GDOT to maintain their impressive growth in the future.
