BTIG Upgrades Green Dot; Sees Sale Unlocking Franchise Value

• Green Dot Corporation GDOT shares have gained 5 percent since February 9.
• BTIG’s Mark Palmer upgrading the rating for the company from Neutral to Buy, while maintaining a price target of $23.
• A sale of Green Dot may unlock substantial franchise value and earnings power, Palmer stated.

Green Dot’s near-term outlook continues to be “murky.” Moreover, recent media reports suggesting management’s decision to seek strategic alternatives do not appear credible, analyst Mark Palmer commented. He added, however, that the company has “significant franchise value and trapped earnings power that could be unlocked by a sale.”

There had been an activist campaign recently, with the goal of bringing changes in Green Dot’s senior management and Board of Directors, with the ultimate objective of a sale of the company.

“We agree that shareholder value may be maximized by having GDOT become part of a larger firm with the resources needed to pursue the various strategic initiatives that management has outlined as potential new avenues for growth,” Palmer wrote.

Among the possible new business verticals could be secured and unsecured credit cards, payroll cards, higher education cards and domestic and international money transfer. All of these could “lever off of the footprint established by the company’s general purpose reloadable (GPR) prepaid debit card franchise,” the analyst said.

This franchise includes 4.5mm active cardholders, has a distribution network with >100,000 retail locations, and a reload network that processes more than 50mm transactions annually.

“We also believe the GDOT’s valuable collection of data is often overlooked when investors are assessing the stock. The company has amassed purchase and reload data on more than 25mm current and previous cardholders, an underappreciated source of value that awaits monetization,” Palmer added.