The Basics of Green Dot

Worldwide Invest Better Day 9/25/2012

For well-nigh 20 years now, the Motley Fool has been here to help you invest better and smarter, using spot-on analysis and a razor-sharp wit. To celebrate Worldwide Invest Better Day on September 25, we are taking some time to get back to the basics -- of investing, that is. In that spirit, I have rounded up some sweet financial sector stocks that have been showing some real sparkle and promise lately.

Without further ado, let me introduce you to the focus of this particular article: Prepaid financial services provider, Green Dot (NYSE: GDOT  ) .

An alternative to conventional banking
Green Dot has been providing alternative banking products to the unbanked and underbanked for more than 12 years. A little over two years ago, the company went public, and its footprint has been increasing ever since. Its prepaid debit cards are available at more than 50,000 retail locations, serving those who are unable to -- or, choose not to -- avail themselves of traditional bank services such as checking accounts and bank credit or debit cards.

Recently, Green Dot stumbled a bit, losing market share after its second-quarter results paled in comparison to those of competitor NetSpend (NYSE: NTSP  ) , and adjusting its outlook downward. Both companies dropped in value, but Green Dot's price sunk over 60% the day of the announcement.

One analyst at Piper Jaffay, however, saw some sun amid the clouds, noting that Green Dot has some big plans for the upcoming months. Earlier this year, the company penned an agreement with Dollar Tree (NYSE: DLTR  ) , whereby the retailer will host Green Dot's general purpose reloadable debit cards and MoneyPak card reload stations before the end of this year. When the partnership is up and running, Green Dot's reach will jump to about 65,000 locations. Green Dot also has deals with UniRush, a company co-founded by Russell Simmons, to provide the retail version of its prepaid RushCard, as well as student-loan company Sallie Mae.

Meantime, Green Dot had a spot of good news from another major retailer. Not only did it renew its contract with Wal-Mart (NYSE: WMT  ) to continue providing that store's branded prepaid gift cards, but rival American Express (NYSE: AXP  ) will no longer offer its own GPR card, Bluebird, at Wal-Mart locations. The credit card giant had been trialing its product to the less tony set for a few months, but the product never caught on -- news that has since given Green Dot's stock a nice lift.

One Fool's take
Though Green Dot did disappoint on analyst's projections, it still produced a 17% year over year increase in revenue, compared to NetSpend's 15% jump. While both companies have seen revenue growth drop a bit over the past few quarters, Green Dot's many irons in the fire should help prop things up going forward. Add to that the fact that the continued wariness of bank customers is driving business for the GPR market, and you've got a recipe for success, reloadable at a major retail outlet near you.

I'll be covering other great stocks over the next couple of weeks, as will my fellow Fools. Check out our special website set up especially for this investing extravaganza at InvestBetterDay.com. There will be lots of great articles posted there through September 25, all with a particularly informative take on various facets of investing. We'd love to have you on board, too -- so click through to the site and prepare to be informed and amused by the never-dull world of investing!

Fool contributor Amanda Alixowns no shares in the companies mentioned above.

 Motley Fool newsletter serviceshave recommended creating a write covered strangle position in American Express. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter services free for 30 days.


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