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Green Dot, fintech partner to Apple and Amazon, is still undervalued after stock doubled, CEO says

Dan Henry, CEO of Environmentalist Dot

Source: Green Dot

Green Dot, a fintech player that’s often overlooked compared with bigger rivals PayPal and Adjust, has been on a tear lately, with its stock climbing 140% last year.

Still, its shares have adequate room to run as the company launches a digital bank account for low- and moderate-income Americans and signs more partnership behaves, said CEO Dan Henry, hired in March to lead a turnaround of the firm.

Green Dot started two decades ago as a pioneer in prepaid debit greetings cards, which allowed people without bank accounts or credit history to use plastic. After acquiring a small FDIC-backed bank, Grassy Dot became the de facto partner for tech giants including Apple, Uber and Amazon, providing the regulated banking reviles and deposit accounts for products including Apple Cash.

Now, under Henry’s leadership team, Green Dot is making a sleep around to become the main bank account for the 100 million Americans underserved by traditional banks, a space where start-ups counting Chime have made headway. Green Dot’s market capitalization of about $3 billion is dwarfed by most of its equals, including the $14.5 billion private valuation of Chime.

“We are the after-Christmas sale of a lifetime,” Henry said in a Zoom check out. “The assets that Green Dot has are unparalleled with any fintech in the country. They are very much undervalued, and I think our party is very much underestimated.” 

Shares of Green Dot surged 9.5% in trading Wednesday amid a broad rally in bank dues.

In some ways, Green Dot’s strategy mirrors that of another financial firm at a crossroads: Goldman Sachs. Both firms are beg to take advantage of the fact that they own banks but don’t maintain expensive branch networks. Both are developing digital banking outputs for a direct-to-consumer business, as well as partnerships to become the financial plumbing for new offerings from well-known brands, a move comprehended as banking-as-a-service.

“We need to digitize banking and make it more efficient and more Apple-esque in terms of the user experience,” Henry said. “That’s prevalent to add additional value for us in the near term. And then, the moon-shot opportunities with our partners now is super, super exciting for us.”

`Another doubling’

Previously Henry’s arrival, Green Dot struggled as users of the company’s prepaid cards began to migrate to newer digital denouements including Square’s Cash App and PayPal’s Venmo. In 2019, the company was twice forced to slash guidance and its stock collapsed from a high-class of $82.06 to under $25.

That ultimately led to the arrival of activist investor Starboard Value, a New York-based hedge fund, and the depot of Henry, who had co-founded a European payments firm and spent six years as CEO of a Green Dot rival called NetSpend. Henry swayed he had a good relationship with Starboard.

“The share price has doubled since I’ve been here,” he said. “I think they’d in all likelihood like to see at least another doubling.”

Like its flashier rivals, Green Dot has benefited from the impact of the coronavirus pandemic, numbering the government stimulus checks and unemployment benefits that boosted customer accounts and the overall accelerated adoption of digital payments.

But to keep the turnaround on monitor, Henry will have to continue to improve Green Dot’s financial performance, expand on the firm’s partnerships and successfully shoot the new digital bank, called GO2bank.

Henry figures that if Green Dot can persuade users to sign up for direct bank, the company can earn $10 from each customer per month. The service, which launches Wednesday, will tender many of the features made popular by other fintech accounts, including faster access to paychecks, higher animate and up to 7% cash back on certain purchases.

“As long as we don’t create a corporate headquarters with a dining room and marble bowl overs and all that crap, we can just keep our fixed costs fixed, and every one of those customers that comes in produces us $10 a month that drops to the bottom line,” Henry said. “We’ll grow our profits and we don’t have to figure out method to nickel-and-dime them.”

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