Compass Point Upgrades Green Dot (GDOT) to Buy
The analyst comments, "Green Dot reported a 1Q'13 earnings beat. Walmart linked revenue increased 11% from the prior year quarter following 14% growth reported in 4Q'12 -- despite facing competition from American Express in each quarter. Non-GAAP revenue increased 8% from a year ago setting a new high water market -- despite several adverse headwinds. The recent revenue strength suggests that Green Dot's business model is not be derailed by increasing competition. Given (1) this recent revenue strength in addition to (2) potential takeout value and (3) the balance sheet -- we upgrade our rating to Buy. While Green Dot's distressed valuation has meaningfully corrected over the past 10 months, the shares still screen cheap at 8.6x our estimate of this year's EPS excluding unencumbered cash and at 9.4x our estimate of this year's free cash flow adjusted for unencumbered cash. Initiatives like GoBank which rolls out this summer offers further upside to estimates and our price target.
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Shares of Green Dot closed at $15.71 yesterday, with a 52 week range of $9.05-$26.69.