Bull of the Day: Green Dot (GDOT)

As the world’s largest prepaid debit card company, Green Dot GDOT is starting to flex its reach in the pro-consumer and personal banking markets.

Although Green Dot is not part of the Russell 2000, GDOT could be a “low-priced” stock that has more upside with investor sentiment shifting toward undervalued U.S. companies amid rate cut hopes.

Still trading under $15 a share, Green Dot stock has now spiked nearly +30% year to date after delivering strong Q2 results in early August, which were attributed to a combination of strategic execution, expanding partnerships, and operational efficiency.  

Green Dot’s Emerging Growth Catalysts

Green Dot has been public since 2010, and while the company hasn’t been a fast disruptor like other fintech firms, a shift toward platform-based services is starting to fuel its growth.

These platforms have led to lucrative partnerships, including with Walmart WMT and Uber UBER, which use Green Dot’s Instant Payment Network as an early payday or instant pay option for delivery drivers. Furthermore, Green Dot’s Arc platform is gaining popularity as a comprehensive embedded finance platform that offers businesses a single-source solution for banking and money movement services. Expanding its Banking as-a-Service (BaaS) footprint, Green Dot’s Arc platform has inked new deals with Samsung and Credit Sesame.  

Thanks to these strategic partnerships, Green Dot has continued to hit new peaks in annual revenue with projections edging north of $2 billion after posting a record of $1.72 billion in 2024.

Q2 EPS Surprise & Positive EPS Revisions  

Blowing away earnings expectations last month, Green Dot posted Q2 EPS of $0.40, crushing expectations of $0.17 by 135%. This also marked a 60% increase from Q2 EPS of $0.25 a year ago.

Notably, management emphasized improving the earnings power of the balance sheet, suggesting better cost discipline and asset utilization. Correlating with this rhetoric and the very impressive Q2 earnings beat, EPS estimates are nicely up for Green Dot in the last 30 days for fiscal 2025 and FY26.

In the last month, FY25 EPS estimates are up over 10% from $1.22 to $1.35, with FY26 EPS revisions rising 8% from $1.44 to $1.56.

Green Dot’s Attractive Valuation

Most intriguing regarding Green Dot’s strengthening outlook is that GDOT trades at an attractive 10X forward earnings multiple. Despite a sharp YTD rally, Green Dot stock still offers a pleasant discount to its Zacks Financial Transaction Services Industry average of 15X forward earnings, which includes prominent companies such as Visa V, Mastercard MA, and PayPal PYPL.

Plus, GDOT trades well under the preferred level of less than 2X forward sales compared to the industry average of 2.7X.

Conclusion & Final Thoughts 

Keeping in mind that past performance is not always an indicator of future success, Green Dot is starting to make its mark in the Financial Transaction Services Industry, which is currently in the top 21% of over 240 Zacks industries.

It's noteworthy that the outlook for these companies could become more appealing as lower rates would reduce funding costs, while increasing consumer spending. This could be very advantageous for Green Dot regarding the expansion of its fintech platforms and the ability to benefit from interchange fees and other transaction-based revenues.  

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research