Green Dot rises on Dollar Tree distribution deal

Green Dot shares rise on exclusive deal to distribute cards through Dollar Tree stores

Associated Press

NEW YORK (AP) -- Shares of discount banking chain Green Dot Corp. rose Monday after the company said it signed a new deal with the retailer Dollar Tree Inc. that will expand the availability of Green Dot's prepaid banking cards.

The company also announced two contract renewals, one with Wal-Mart Stores Inc. and the other with the online payment company PayPal, a division of eBay Inc.

THE SPARK: Green Dot said it multiyear contract with Dollar Tree is exclusive, and will let Green Dot distribute a broad line of its branded, reloadable banking cards.

The company will start placing its products in Dollar Tree discount retail stores in the second half of the year. The deal adds more than 4,300 stores to Green Dot's national retail distribution footprint, bringing its total number of retail outlets to about 65,000.

The FDIC-insured Green Dot cards will be issued by Green Dot Bank.

The company also said it renewed an agreement with Wal-Mart to manage the company's Wal-Mart Visa Gift Card. Green Dot has managed the program since 2007, and said it will unveil new designs and a broader product lineup to expand the program.

Green Dot also signed a multiyear extension of its agreement with PayPal. The program lets U.S. consumers add money directly to their PayPal accounts.

THE ANALYSIS: Sterne, Agee & Leach analyst Greg Smith said in a note to clients that Green Dot's deal with Dollar Tree is promising because of its exclusivity.

Green Dot has signed similar, non-exclusive deals that allow competitors like Netspend Holdings Inc. to distribute banking cards at a retail chain as well. For example, NetSpend recently signed a non-exclusive distribution deal with the discount retail chain Family Dollar, he said.

Smith rated Green Dot a "buy," in part because he expects the market for prepaid banking cards to grow, and Green Dot is positioned to benefit. He said the company should be able to push down costs, which should offset factors like rising distribution costs.

Smith gave the company's stock a target price of $37 per share.

SHARE ACTION: Green Dot's stock rose $1.27, or 6.2 percent, to $21.63 in afternoon trading. That still leaves shares close their year-low. The stock has traded between $20.19 and $39 over the last year. The stock has been steadily declining since early 2011, when shares traded above $64.

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