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Analyst cuts Green Dot to 'Sell' on competition

NEW YORK (AP) -- Green Dot's stock fell Wednesday after an analyst cut his rating on the banking holding company citing its tough competition.

THE SPARK: Janney Capital Markets' Thomas McCrohan lowered Green Dot Corp. to "Sell" from "Neutral." He maintained a $15 price target. Green Dot markets prepaid debit cards and related services at retail locations and online. Its bank subsidiary is Green Dot Bank.

THE ANALYSIS: McCrohan said in a client note that Green Dot faces stiff competition from companies that have more resources, like American Express Co. Last week, American Express announced a reloadable prepaid card called Serve that will be available in stores such as CVS and 7-11. The card will have a $1 monthly maintenance fee and no fee for cash reloads.

In comparison, McCrohan said that Green Dot's Walmart MoneyCard has a $3 reload fee and a $3 monthly maintenance fee.

"Paying a fee to reload cash onto a card is an irritant to most consumers, and retailers are beginning to turn to zero-fee reloads as a tool to drive foot traffic," he wrote.

McCrohan said that there's also new competition from drug stores and grocery store operators. These businesses are coming out with reloadable prepaid cards linked to their existing loyalty programs, like the Walgreen Balance card.

A Green Dot Corp. representative declined to comment.

SHARE ACTION: The stock fell $1.30, or 6 percent, to $20.31 in afternoon trading. The shares are up 68 percent for the year to date.