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Wednesday, Aug 17, 2022

Green Dot Lowers Outlook, Shares Plunge

Shares of Green Dot Corp. plummeted more than 60 percent Friday after the online debit card provider gave a weak outlook amid sharper competition, prompting 10 analysts to downgrade the stock.

In a late Thursday call with analysts, Chief Executive Steven Streit said the company, which mostly markets its cards at Wal-Mart stores and other retailers, has heard from the retailers that new debit cards from other providers will roll out in the next several months.

“We see a greater level of uncertainty going forward in our business as our market and the prepaid industry in general continues to evolve,” Streit said.

The Monrovia company now sees adjusted full-year earnings of between $1.29 and $1.32 a share. It earlier forecast earnings of $1.65 to $1.70 a share.

For the second quarter, Green Dot reported net income of $11.9 million (27 cents a share), compared with $12.1 million (27 cents) in the same period a year ago, which had fewer shares outstanding.

Adjusted profit was 35 cents. Analysts surveyed by Thomson Reuters on average had expected adjusted profit of 38 cents.

Card revenues and other fees rose 10 percent. But the company’s operating margin narrowed to 13.8 percent from 16.8 percent as expenses rose 23 percent.

Nearly half of the 22 analysts following Green Dot cut their recommendation on the stock to neutral or underperform. Nearly all of the other analysts already had neutral ratings.

“Management delivered the surprisingly pessimistic news to an audience of mostly bewildered analysts,” D.A. Davidson & Co. analyst John Kraft noted dryly in a Friday morning note to clients. “We slashed our estimates and while we suspect management’s guidance was overly conservative, we expect the stock to be in the penalty box from some time.”

Shares closed down $14.26, or 61 percent, to $9.06 on the New York Stock Exchange.

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