Will Walmart And MoneyCard Pump Up Green Dot?

Investors did not take kindly to Green Dot Corp.’s most recent results, with stock tumbling down 15 percent at the opening of trading Friday (Nov. 6).

Looking at general numbers, revenues of $147 million and earnings of $0.15 per share were “a tad softer” than expectations, management said during its conference call with sell-side analysts. The top line missed top line consensus of $149 million and the bottom line bested estimates by seven pennies.

Investors likely are concerned with the headwinds posed by the exit from the MoneyPak business, which puts a 5 percent damper on revenues – a hole the company must fill with new, as yet untested, product launches.

The guidance also remains mixed, with revenues to come in below prior estimates, but earnings and EBITDA to be within anticipated ranges, with earnings at $1.24 to $1.35, while the Street is at $1.31.

New card launches and product tweaks will do much to offset the legacy business, said the company, with a new MoneyCard product to land at Walmart. Though few specifics were offered, the company stated that the expectations are for card adoption and utilization to have relatively higher rates than seen elsewhere.

Green Dot’s management said that its new line of prepaid cards will let cardholders write checks to cover activities such as rent and other bills that would traditionally require a paper check tied to a separate checking account. The prepaid cards also have a technological feature wherein they can deposit checks using their cellphone cameras and direct deposit customers will be able to use that function to get money slated to that activity up to two days before payday.

The prepaid segment, in fact, seems to be a big driver of management’s projections that it will grow revenues enough to offset MoneyPak, largely on the heels that the newer prepaid products will carry what were referred to as “better unit economics” going forward.

Speaking more broadly about the prepaid industry’s competitive dynamics, and specifically the overall general purpose reloadable card (GPR), CEO Steven Streit said “pretty much everybody and their great aunt launched a GPR program, say, starting in 2013 or late 2012 even. And so if you think about a rack where Green Dot up until the end of 2012 was the only product on the rack, American Express came out with two or three products, promoted it heavily … InComm has their products and NetSpend put their products into retail … now fast forward a year and a half, two years later, Chase has gone out of the market … American Express … their products have not sold.”

Streit noted that the preponderance of competitors had initially eaten into his company’s growth rates, and now with the exit or scaling back of prepaids from competition, the landscape should be better for Green Dot. The landscape, Streit projected, should be winnowed to Green Dot, InComm and NetSpend. And since there are no major rollouts on the near-term horizon, said the executive, that competition should be a rational one.

For now, though, investors seem to rushing toward the sidelines.