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On Wednesday, Northland analyst Mike Grondahl upgraded Green Dot Corporation (NYSE: NYSE:GDOT) stock rating from Market Perform to Outperform and set a new price target of $12.00. The upgrade reflects a positive outlook following the company's recent executive changes and strategic moves. Green Dot appointed William Jacobs as the interim CEO on March 10th, taking over from George Gresham. In conjunction, the company announced the beginning of a process to explore strategic alternatives. According to InvestingPro data, the stock currently trades at $6.70, having declined about 24% in the past week, suggesting potential upside to the analyst's target.
Grondahl's commentary highlighted the potential value in Green Dot's various business segments, including Tax, Paycard, and its Utah banking charter. These components, according to Grondahl, could attract substantial interest if separated. The analyst's optimism is further buoyed by the belief that Green Dot is earnest in its pursuit of a sale and has engaged Citigroup (NYSE:C) to assist in this endeavor, after previous strategies failed to yield the desired turnaround. InvestingPro analysis indicates the company is currently undervalued, with annual revenue of $1.72 billion and a "Fair" overall financial health score.
The decision to upgrade the stock is based on an attractive risk-reward scenario for the shares and the assessment that Green Dot could be valued higher in the event of a sale. With a market capitalization of around $370 million, minimal cash and debt, and a projected adjusted EBITDA of $165 million for 2025, Green Dot's segments are likely to draw attention from both strategic and financial buyers. InvestingPro subscribers can access additional insights, including 8 more ProTips and a comprehensive Pro Research Report analyzing the company's potential.
The report also noted that Steel Partners holds a 7% stake in Green Dot. Further details regarding WebBank, which is connected to Green Dot, were mentioned as available on the following page, indicating additional information of interest to investors. Despite recent challenges, InvestingPro data shows analysts expect the company to return to profitability this year, with projected earnings per share of $1.13 for 2025.
In other recent news, Green Dot Corporation reported its fourth-quarter earnings, revealing operating earnings per share (EPS) of $0.40, which slightly exceeded expectations. Revenue surpassed projections across all three business segments, with notable performance in Business-to-Business (B2B). Despite higher expenses, the company's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) outperformed estimates by approximately 2%. Meanwhile, Green Dot is exploring strategic alternatives with Citi's advisory services, following the departure of CEO George Gresham and the appointment of Chris Ruppel as Interim President. This move is part of a broader strategic review as the company navigates a competitive and regulated environment.
Craig-Hallum upgraded Green Dot's stock rating from Hold to Buy, citing the company's diverse assets and the decision to seek advisory services for a potential sale as positive developments. Conversely, Keefe, Bruyette & Woods (KBW) adjusted their financial outlook, reducing Green Dot's price target to $10.00 from $12.00 while maintaining a Market Perform rating. The adjustment reflects concerns about higher expenses and a weaker outlook for 2025. Additionally, Green Dot appointed Kim Olson as the new Chief Risk Officer to enhance its risk management strategies, reporting directly to the CEO. These developments underscore Green Dot's efforts to strengthen its leadership and explore strategic opportunities in response to market dynamics.
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