Green Dot Corporation (GDOT – Free Report) is gaining from the expansion of its addressable market with the help of its banking-as-a-service (BaaS) account programs. The long-standing relationship with Walmart is driving its operating revenues. Meanwhile, low liquidity and no plan to pay dividends could be red flags for investors.
Green Dot reported mixed third-quarter 2024 results. GDOT’s quarterly earnings per share (excluding 28 cents from non-recurring items) of 13 cents missed the Zacks Consensus Estimate by 23.5% and declined 7.1% from the year-ago quarter. Revenues of $406 million beat the Zacks Consensus Estimate by 6.4% and increased 15% on a year-over-year basis.
How is Green Dot Doing?
GDOT’s BaaS account programs are helping it expand its addressable market. The company partners with some top consumer and technology companies, including Amazon, Apple, Intuit, and Uber, to design and develop their fintech banking solutions via its BaaS platform. The partners then make the solutions available to their consumers through integration with the BaaS program. This enables GDOT to expand its spectrum of consumers.
Green Dot’s key driver of its operating revenues is its long-standing relationship with Walmart. The company has been providing Walmart-branded GPS cards since the launch of the Walmart MoneyCard program in 2007. Since 2014, Green Dot Bank has been issuing those card accounts.
GDOT designs and delivers the Walmart MoneyCard product and provides all ongoing program support, including network IT, website functionality, regulatory and legal compliance, customer service, and loss management.
Walmart provides it with shelf space to offer Green Dot-branded cards and GoBank checking account products. The operating revenues are derived from products and services offered via Walmart, and the metric represents 24%, 21%, and 17% of total operating revenues for 2021, 2022 and 2023, respectively.
GDOT’s balance sheet looks strong, with no debt obligations. Cash and equivalents were $1.5 billion as of Sept 30, 2024. In 2023, the company generated an operating cash flow of $98 million. In the third quarter of 2024, it generated an operating cash flow of $16.3 million. Since the company has zero debt, the cash is available for investments for growth and distribution to shareholders.
Risks Faced by GDOT
Green Dot ended the third quarter of 2024 with a current ratio of 0.52, which is lower than the industry average of 1.16. A current ratio of lower than 1 indicates that the company might fail to cover its short-term liabilities.
Image Source: Zacks Investment Research
GDOT has never declared and does not have any plan to pay cash dividends on common stock at present. The Federal Reserve Board’s risk-based and leverage capital requirements, and other federal rules and regulations hinder the company’s ability to pay cash dividends. Dividend-seeking investors should avoid buying GDOT shares.
Green Dot’s Zacks Rank & Stocks to Consider
The company carries a Zacks Rank #3 (Hold) at present.
Some better-ranked stocks in the broader Zacks Business Services sector are Coherent Corp. (COHR – Free Report) and Lightspeed POS (LSPD – Free Report) .
Coherent flaunts a Zacks Rank of 1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
COHR has a long-term earnings growth expectation of 44.1%. It delivered a trailing four-quarter earnings surprise of 25.5%, on average.
Lightspeed currently sports a Zacks Rank of 1. It has a long-term earnings growth expectation of 55.4%.
LSPD delivered a trailing four-quarter earnings surprise of 70.8%, on average.
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