Green Dot Corp.'s shares fell more than 12% Friday morning after an analyst downgraded the prepaid card company's shares because it reported a lower rate of card activations.
The company on Thursday said consumers activated 1.5 million of its prepaid debit cards in the fourth quarter, up 10% from a year earlier. The increase was smaller than the 37% year-over-year growth rate Green Dot reported for the prior quarter.
While the company's quarterly results were good, they "were not without some blemishes that could put pressure on the shares, including deceleration in card activations," Thomas McCrohan, an analyst with Janney Capital Markets, wrote in a research note to investors Friday morning. McCrohan downgraded Green Dot's shares to "sell" from "neutral."
Green Dot's share price was down 12.7% to $50.91 Friday morning.
Green Dot operates prepaid card programs that are targeted primarily at underbanked consumers. The company, which markets cards issued by partner banks and sold through retail stores like Wal-Mart Stores Inc., Walgreen Co. and 7-Eleven Inc., has been pushing to grow its base of long-term customers.
Steve Streit, the Monrovia, Calif., company's chairman, president and chief executive, said in an earnings conference call on Thursday that about half of its cards are sold to long-term users, which provide about 85% of its revenue. Many of those customers use direct deposit and make more frequent transactions than short-term users.
Green Dot got a boost last month when the U.S. Treasury Department selected it to manage a pilot program that will allow low-income Americans to receive their tax refunds on a prepaid card. However, company executives said Green Dot would not likely generate a profit from the program.
The company said its fourth-quarter revenue surged 32% from a year earlier to $91.8 million.
The company report net income of $7.94 million, up 16% from a year earlier.
