Green Dot (GDOT) Banks on BaaS Partnerships, Cost Woes Stay

Green Dot (NYSE:GDOT) Corporation GDOT is currently benefiting from its banking-as-a-service (BaaS) account programs and a long-standing relationship with Walmart (NYSE:WMT) WMT.

The company recently reported first-quarter 2021 adjusted earnings of 83 cents per share that missed the consensus estimate by 10.8% and declined 26.5% on a year-over-year basis. Non-GAAP operating revenues of $379.8 million surpassed the consensus mark by 6.7% and increased 10% year over year.

Green Dot shares have gained 9.3% over the past year, underperforming the 13.5% rally of the industry it belongs to.

Expanding Addressable Market

Green Dot is expanding its addressable market with the help of its BaaS account programs. The company partners with some top consumer and technology companies, including Amazon AMZN, Apple AAPL, Intuit (NASDAQ:INTU) and Uber (NYSE:UBER), to design and develop their fintech banking solutions through its BaaS platform. These solutions are then made available by the partners to their consumers and partners again through integration with the BaaS program, eventually expanding Green Dot’s spectrum of consumers.

Long-Standing Relationship with Walmart

Green Dot’s long-standing relationship with Walmart is a key driver of its operating revenues. The company has been providing Walmart-branded GPS cards since the launch of the Walmart MoneyCard program in 2007. Green Dot Bank has been issuing those card accounts since 2014.

Green Dot designs and delivers the Walmart MoneyCard product and provides all ongoing program support, including network IT, website functionality, regulatory and legal compliance, customer service, and loss management. Walmart provides it with shelf space to offer Green Dot-branded cards and GoBank checking account products.

Green Dot’s operating revenues derived from products and services offered through Walmart represented 27%, 34% and 36% of total operating revenues for 2020, 2019 and 2018, respectively.

Expense Woes Remain

Green Dot is seeing increase in expenses as it continues to invest in sales, marketing and product development. In the first quarter of 2021, the company’s total expenses increased 18.5% year over year to $359.5 million. In 2020, total operating expenses of $1.22 billion increased 24.1% year over year.

These expenses rose 5.4% year over year in 2019, 18.1% in 2018 and 20.8% in 2017. Hence, the bottom line is likely to remain under pressure going forward.

Green Dot currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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