Don’t Call It A Comeback: Green Dot’s Quiet Climb

What's Next In Payments®
3:27 PM EST December 11th, 2012

“Bluebird’s existence means certain demise for Green Dot.” 

That was the popular narrative in October, after American Express and Walmart teamed up to launch a prepaid program of impressive scale. It stood to figure that Green Dot couldn’t compete, and we bought into that line of reasoning too.

Yet two months after Bluebird’s launch, Green Dot’s stock isn’t plummeting: it’s rising.

The surprising facts: since October 16, the day of Bluebird’s launch, Green Dot stock has actually risen from 20.44 percent, from $10.37 a share to its current mark of $12.49. Yesterday, analysts at Piper Jaffray reissued Green Dot’s overweight rating, setting a $15.25 price target for the stock.

The day after Bluebird’s announcement, Green Dot lost 23.7 percent of its stock value. At the time, it had lost 60 percent of its value since July, following disappointing Q2 earnings. The company derived 62 percent of its revenue from Walmart in that quarter, so the news that Walmart would be adding and backing a competitor in Bluebird seemed to put the writing on the wall for Green Dot’s prepaid aspirations.

So why are investors still interested in Green Dot as a buy low candidate? One reason comes from a Piper Jaffray note that a Walmart survey has revealed that just 15 percent of stores reported “a significant loss of debit card market share” for Green Dot. In other words, Bluebird hasn’t edged Green Dot out of the Walmart market like many thought.

This Forbes piece brings up another interesting point: Bluebird has helped to legitimize the prepaid industry. Arjun Schutte writes that by framing prepaid as “a checking account replacement, instead of a glorified gift-card,” Bluebird finally offers the underbanked what they really need. That being said, Schutte believes that Bluebird has several deficiencies that will prevent it from knocking Green Dot out of contention, and that Green Dot is due for a “second act” thanks to its Green Dot Bank acquisition.

Green Dot still has a long way to go to make up for its 2012 losses, but for now, it’s at least been offered some glimpses of hope.

Are you optimistic about Green Dot’s future? Is the prepaid industry’s growth enough to interest you in investing? Let us know in the comments below. 

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