NetSpend Holdings Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of prepaid bank card issuer NetSpend Holdings (Nasdaq: NTSP  ) fell by as much as 14% in intraday trading after reporting worse-than-expected first-quarter results.

So what: Chalk it up the volatile nature of banking to the unbanked. Last month, both NetSpend and peer Green Dot (Nasdaq: GDOT  ) surged when optimists concluded that 60 million low-income Americans would turn to the prepaid market for relief.

Now what: But that vision is getting blurrier by the day. NetSpend's revenue rose 16% to $80.8 million, while adjusted profit increased a penny to $0.11 a share. Analysts were expecting $81 million and $0.12 a share, respectively.

Most of the per-share gains were lost to dilution as NetSpend's share count ballooned 8% from last year's Q1. Cash from operations declined over the same period. Both are bad signs -- more than enough to keep me away from this stock.

Interested in more info on NetSpend Holdings? Add it to your watchlist.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. You can try any of our Foolish newsletter services free for 30 days.

Tim didn't own shares in any of the companies mentioned in this article at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is at least 10% better than other disclosure policies.


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