Seeking Alpha: After The Panic And Rally, Green Dot Still Has Plenty To Prove

Watching Green Dot (GDOT) from the cheap seats (ie, not as an actual shareholder) has been an interesting experience, as the market has moved through a pretty predictable cycle of excessive risk-blind optimism, near-blind panic, and relief. While that all has been going on, the market for prepaid debit cards has continued to develop and mature but still seems to be largely unpenetrated. At the same time, Green Dot has been rolling a range of services and distribution points that should give it a leg up in maintaining its position as the market leader.

At this point, I think Green Dot is in sight of fair value, but I'll be the first to acknowledge that there is a bigger than average range of potential outcomes here. I'm expecting Green Dot to generate mid-to-high single digit revenue and free cash flow growth, but the opportunity is larger than those numbers suggest and Green Dot could elbow out its competition. I could also see this company appealing to a range of companies in the payment foodchain, any one of which could use the fee income and customer base that Green Dot can offer.

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After The Panic And Rally, Green Dot Still Has Plenty To Prove

Investopedia: Green Dot Making Investors A Little Green

It's not uncommon for new stocks to give back a lot of their market cap as the initial public offering (IPO) buzz fades and initial buyers look to cash out. In the case of Green Dot (NYSE:GDOT), that readjustment period has been pretty difficult as the stock is off nearly 60% from its all-time high. Making matters worse, competition is heating up and management's decisions have left more than a few investors scratching their heads.

Not Quite Living up to all the Growth Hopes  
Green Dot has logged three straight quarters of below-consensus revenue, and that frankly weighs heavier with institutional investors than the fact that that revenue is growing at a better than 20% clip. Where Green Dot is earning some credit is with the margins, as the company did pretty well in the last quarter with a two point improvement in adjusted operating margin.

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http://stocks.investopedia.com/stock-analysis/2012/Green-Dot-Making-Investors-A-Little-Green-GDOT-NTSP-AXP-WMT0315.aspx

Investopedia: Green Dot Looking Black And Blue

So far, prepaid debit card provider Green Dot (Nasdaq:GDOT) has followed a pretty familiar pattern - a successful IPO, some initial strength as big investment banks roll out coverage, and then a skidding share price as IPO buyers cash out and actual financial performance fails to match the lofty expectations of the IPO honeymoon. Even though Green Dot has disappointed some investors and there is still some regulatory risk, the stock seems to have skidded past a point where the fundamentals would support. 

Q2 Good, but Not Good Enough  
On just a casual first look, it might be hard to see why these shares have dropped to a 52-week low. Revenue rose 29% in the second quarter on a 23% increase in new activations and a 27% increase in active cards. Unfortunately, good as that was, it was below the consensus estimate for the second time in a row, and also represents ongoing deceleration in growth. 


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