Pre-paid card company Green Dot (GDOT) is down 60% today following a disastrous second quarter report, in which management acknowledged that competition threatens its core business.
Green Dot’s 35 cents of core earnings per share were 3 cents below expectations. Revenue also fell short of Street estimates. But the road ahead is murky, and the company cut EPS expectations by 22%.
Although our growth was strong over the first half of 2012 and some notable new business wins could potentially provide meaningful tailwinds over the longer-term, we are lowering our guidance for the remainder of the year given that we now see a greater level of uncertainty going forward in our business as�the prepaid�marketplace continues to evolve,� said Chairman and CEO Steve Streit.
Numerous analysts downgraded the company’s shares.
“It is likely that deterioration of GreenDot�s market position and financial performance is just beginning,” wrote SunTrust Robinson Humphrey analyst Andrew Jeffrey in downgrading shares to Reduce from Buy. “This portends sustained EPS contraction and a structurally impaired valuation. These issues could be exacerbated by the 2015 Walmart contract renegotiation and the potential loss of exclusivity. Such an event could permanently impair organic-revenue growth and profitability.”
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