Thursday , December 7, 2023

Wall Street Punishes Green Dot As Growth Slows

Green Dot Corp.’s shares plummeted Thursday morning after the company reported a slowdown in year-over-year revenue growth and a drop in active accounts that surprised some observers.

The Pasadena, Calif.-based company, which specializes in prepaid products and banking services, reported adjusted second-quarter revenue of $265 million, up 5% year-over-year but down sharply from the 14% increase the company logged for 2018’s June quarter. At the same time, active accounts slipped 3% year-over-year to 5.66 million, a result the company attributed to more intense competition from recently emerged startup banks. Still, the result came “unexpectedly,” said Robert Napoli at Chicago-based William Blair & Co. in a research report released Thursday.

To win more banking share from Millennial and Generation Z customers, Green Dot this summer launched its Unlimited banking service, which includes an account offering 3% cash back on online or in-app transactions, a debit card, and faster access to paycheck deposits. The account carries several fees, including a $7.95 monthly charge and $3 for out-of-network ATM withdrawals. Customers can avoid the monthly fee if they spend at least $1,000 in the prior month.

Analysts who follow Green Dot cite the large demographic the new initiative is targeting. “Consider there are 120 million consumers between 18 and 50 years old,” Napoli’s report said.

Still, Wall Street reacted negatively to these results. Green Dot’s shares were trading just shy of $30 at mid-morning Thursday, down more than 35% from Wednesday’s close. The plunge follows a 30% drop Green Dot sustained in May at its last quarterly earnings call after it announced a planned $60-million investment to expand the company’s reach into new banking markets. Its shares never fully recovered before Thursday’s slide.

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