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Green Dot's (GDOT) Price Target Raised to $21 at Deutsche Bank

June 23, 2015 2:11 PM EDT
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Price: $9.33 +1.63%

Rating Summary:
    4 Buy, 25 Hold, 2 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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Deutsche Bank earlier maintained a Hold rating on Green Dot (NYSE: GDOT) and raised its price target to $21.00 (from $18.00). Yesterday Green Dot announced new long-term agreement with Walmart, whereby Green Dot Corporation and Green Dot Bank will continue to serve as the program manager and issuing bank for the Walmart MoneyCard suite of prepaid reloadable debit card products.

Commenting on the development, analyst Ashish Sabadra said, "The company expects the contract renewal would have negatively impact EBITDA margins by less than 200bps for FY15 if the new contract terms were active for the full year. Given WMT private card was expected to generate 30% of revenues, we expect the commissions to be up by ~600bps from 26% to 32%. Given the overhang from the WMT renewal is now lifted, we raise our target price to $21."

Sabadra expects share loss and margin headwinds to persist, but plans to monitor the company's new initiatives.

"Cash transfer revenues are impacted by the discontinuation of the MoneyPak PIN and mix shift towards fee waiver products. In addition, MoneyPak PIN discontinuation and increased competition is also impacting the active card growth (Organic active cards declined ~2% in 1Q15). In addition, interchange revenues could potentially remain under pressure from lower interchange yields. Adj EBITDA margins have declined over last few years (partially masked by the TPG acquisition in FY15) given the anemic organic revenue growth and investments in new initiatives. We will continue to monitor the GDOT’s success in new initiatives including rollout of GoBank at WMT, mobile banking at ACE Cash Express, and new products associated with the swipe at the register," added the analyst.

For an analyst ratings summary and ratings history on Green Dot click here. For more ratings news on Green Dot click here.

Shares of Green Dot closed at $15.31 yesterday.



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