A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions. We believe Green Dot Corporation GDOT is such a stock and investors should retain it in their portfolio.
Factors That Bode Well
Accelerated investments in both products and platform parts of its business have dampened the company’s short-term prospects but bode well for the mid to long-term.The stock, though down a massive 61.3% year to date, should recover when these investments start contributing to the company’s top and bottom lines.
Green Dot is investing an incremental $60 million this year in marketing new products and developing BaaS 3.0 and BaaS 4.0 technology platforms. This investment is expected to deliver incremental active accounts of more than one million and incremental revenues ranging between $200 million and $300 million by the end of 2019.
As a part of this investment, Green Dot recently launched Unlimited Cash Back Bank Account. It pays customers a 3% cash back bonus on online and in-app purchases. It comes with a free high-yield savings account that pays a 3% Annual Percentage Yield on their savings up to $10,000.
The company continues to improve and scale its operating infrastructure. Evidently, non-GAAP EPS and adjusted EBITDA increased 22% and 18%, respectively, in the second quarter of 2019.
The company continues to increase purchase volume and attract a more committed customer base. Its current BaaS platform programs are contributing significantly to GDV, active card and revenue growth.
Zacks Rank and Stocks to Consider
Green Dot currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Zacks Business Services sector include Fiserv FISV, Booz Allen Hamilton BAH and Charles River Associates CRAI, each carrying a Zacks Rank #2 (Buy).
The long-term expected EPS (three to five years) growth rate for Fiserv, Booz Allen and Charles River is 12%, 13% and 13%, respectively.
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Charles River Associates (CRAI) : Free Stock Analysis Report
Green Dot Corporation (GDOT) : Free Stock Analysis Report
Fiserv, Inc. (FISV) : Free Stock Analysis Report
Booz Allen Hamilton Holding Corporation (BAH) : Free Stock Analysis Report
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