A stock analyst on March 11 upgraded shares of Green Dot Corp., contending recent concerns over the prepaid card company’s regulatory risks are overblown.
John Kraft, an analyst with D.A. Davidson & Co., wrote in a research note that the Monrovia, Calif.-based company likely is protected from a potential crackdown on fees charged to prepaid card users. Kraft cited a bill that New Jersey Sen. Robert Menendez introduced in December that would ban overdraft, balance inquiry, customer service, inactivity and account closure fees.
Green Dot does not charge many of these fees, Kraft said. “Consequently, we do not believe regulations will negatively impact” the company, he said.
Moreover, New Jersey Democratic state Sen. Paul A. Sarlo recently introduced legislation, SB26811, that would reverse changes to the state’s unclaimed property law, which allows the state to claim unused funds on stored-value cards to help bridge the gap on budget shortfalls. “These changes have caused significant uncertainty for consumers and businesses alike,” the bill notes. (
Kraft also said potential competition posed by banks that might introduce prepaid cards is not a threat.
Kraft upgraded Green Dot’s shares to “buy” from “neutral.” Green Dot’s shares rose as much as 2.9% March 11 to $45.67.
The upgrade comes after another analyst, Thomas McCrohan of Janney Montgomery Scott LLC, cut the company’s 2011 and 2012 earnings estimates on March 7 because of potential pricing pressure from competition and regulatory scrutiny. Green Dot’s shares closed down more than 8% that day.
