BTIG Steps To The Sidelines On GreenDot

BTIG’s Mark Palmer downgraded the rating for Green Dot Corporation GDOT from Buy to Neutral, after the company’s shares surged 25 percent in one month and reached the prior price target of $23.

Although Green Dot has significant trapped earnings power, the same is unlikely to be unlocked in the near term, given the activist campaign being witnessed by the company, analyst Mark Palmer commented.

Absence Of Catalysts

Lack of any apparent catalysts for revenue growth or additional appreciation in Green Dot’s valuation are the key reasons for the downgrade. Palmer pointed out that a sluggish start to the tax season is likely to shift a portion of the company’s revenues and EBIDA at its Santa Barbara Tax Products Group unit from 1Q16 to 2Q16.

The revenue and EBITDA estimates for 1Q16 have been reduced from $229.4 million to $215.8 million and from $90.0 million to $71.5 million, respectively. The revenue and EBIDA estimates for 2Q16 have been raised from $173 million to $187.3 million and from $38.9 million to $50.8 million, respectively.

Activist Campaign

Management aims to involve Harvest Capital, which launched the activist campaign against the company, in choosing new members for its Board of Directors. The company has, however, reiterated faith in its operational strategy.