BTIG Equity Research analyst Mark Palmer described the selloff in the shares of Green Dot Corporation (NYSE:GDOT) as overdone in a note to investors released on Tuesday, April 8. The analyst reiterated his Buy rating with a $31 price target.
The analyst encouraged investors to initiate a position or increase their stockholdings in Green Dot Corporation (NYSE:GDOT) as he believes that stock will “rebound nicely” over the next few months. He expects the operating performance of the company to improve in consecutive quarters this year.
The stock price of Green Dot Corporation (NYSE:GDOT) is up by nearly 2% to $19.48 per share at the time of this writing, around 2:47 in the afternoon in New York.
Stock correction went too far
Palmer noted in his report that more than 29% of the shares of Green Dot Corporation (NYSE:GDOT) were sold since the company released its fourth quarter earnings results and disappointing full year 2014 outlook last January 30.
According to him, the initial, single-digit sell-off is reasonable to some degree because investors need to re-adjust their mindset regarding the quarterly progression of the earnings and revenues of Green Dot Corporation (NYSE:GDOT). However, he pointed out that the current correction in the stock went too far.
Green Dot’s revenue expected to grow
Palmer is convinced that Green Dot Corporation (NYSE:GDOT) is capable of increasing its revenue as the year progress. He believed that various expansion initiatives of the company will deliver positive results. In addition, he is confident that the company’s EBITDA margin will rise and will reach 20% by the end of this year.
Last year, Green Dot Corporation (NYSE:GDOT) launched several initiatives including a product expansion at Wal-Mart Stores, Inc. (NYSE:WMT) and rollout of 27,000 new retail locations at Dollar General Corp. (NYSE:DG), Family Dollar Stores, Inc. (NYSE:FDO), Dollar Tree, Inc (NASDAQ:DLTR), and The Home Depot, Inc. (NYSE:HD). The company partnered with more than 200 check-cashing stores in New York, Chicago and other cities across the country.
“We believe these initiatives in aggregate should enable GDOT to post revenue growth in the 10% to 12% range in FY14,” said Palmer. In addition, he believed that the company will also benefit from the migration of Wal-Mart MoneyCard issuance from GE Capital to Green Dot Bank. According to him, the transfer is already completed and it is expected to result in a significant expense reduction.
Palmer noted that many investors overlooked some of the potential contributors in the future earnings (not-so-distant) of Green Dot Corporation (NYSE:GDOT) such as the GoBank and its smartphone-based bank.
Permission to buy back shares
According to the analyst, the recent decline of the stock price of Green Dot Corporation (NYSE:GDOT) should inspire its management to seek the permission from its regulators to repurchase its shares and put its cash to work.