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Why Is Green Dot (GDOT) Down 15% Since Last Earnings Report?

It has been about a month since the last earnings report for Green Dot (GDOT). Shares have lost about 15% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Green Dot due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Green Dot Q3 Earnings & Revenue Beat Estimates

Green Dot reported strong third-quarter 2018 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings per share of 59 cents beat the consensus mark by 15 cents and increased 73.5% year over year, indicating the ninth consecutive quarter of double-digit growth. The bottom line was driven by strong adjusted EBITDA growth, interest income from the investment of cash deposits held at Green Dot Bank and lower year-over-year effective tax rate. The reported figure also exceeded the company guidance of 41 cents.

Total operating revenues of $230.6 million outpaced the consensus estimate by $7.3 million and increased 14.4% year over year on the back of 100% organic growth. This marked the sixth consecutive quarter of double-digit year-over-year organic revenue growth. The reported figure also exceeded the guidance of $222 million.

Key Operational Metrics

Gross dollar volume grew 18.3% year over year to $9.09 billion. Purchase volume increased 13% from the prior-year quarter to $5.92 billion. The reported quarter ended with 5.43 million active accounts (up 3% y/y) and 10.68 million cash transfers (up 8.9% y/y). The number of tax refunds processed were 0.10 million, flat with the year-ago quarter.

Segmental Revenues

Accounts Services revenues came in at $193.76 million, up 13.9% from the year-ago quarter. The segment benefited from strong organic momentum across all areas of revenue divisions and product lines, with GDV and purchase volume registering growth of 18% and 13%, respectively.

Processing and Settlement Services revenues of $44.15 million, grew 12.9% from the year-ago quarter on the back of organic growth in each of the segment's various product lines, including cash transfers and SimplyPaid worker disbursements and increasing transaction counts.

Operating Results

Adjusted EBITDA of $45.1 million increased 32.9% on a year-over-year basis. Adjusted EBITDA margin of 19.6% increased from 16.8% in the year-ago quarter.

Balance Sheet & Cash Flow

Green Dot exited third-quarter 2018 with cash, cash equivalents and restricted cash balance of $1.04 billion compared with $1.12 billion at the end of the prior quarter. The company has no long-term debt.

The company generated $46.65 million of cash from operating activities in the reported quarter.

2018 Guidance

Green Dot raised its full-year guidance. The company now expects revenues in the range of $1.038-$1.042 billion compared with the previously guided range of $1.022-$1.032 billion.

Adjusted earnings are anticipated to be between $3.18 and $3.22 compared with the previously guided range of $3.03-$3.08.

Adjusted EBITDA is expected to be in the band of $247-$251 million compared with the earlier guidance of $244-$248 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.64% due to these changes.

VGM Scores

At this time, Green Dot has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Green Dot has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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