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Are Insiders Picking a Bottom for Green Dot Corporation (GDOT)?

 November 13, 2012 10:27 AM
 


(By Rich Bieglmeier) Thanks to a ton of Iridium Communications Inc. (IRDM) odds lot purchases by Abdullah bin Abdulrahman, the number of insider purchases for last week pumped up. Widespread buying at Crescent Financial Bancshares Inc. (CRFN) is worth monitoring for regional bank investors. So are Carl Ichan's buy of Take-Two Interactive Software Inc. (TTWO) and the CEO's half-a-million buy at Ironwood Pharmaceuticals, Inc. (IRWD).

[Related -Take-Two Interactive Software, Inc.(NASDAQ:TTWO): Can Take-Two Sustain Profitability Levels?]

However, iStock has a weak-spot for one-time high-fliers that crashed to earth. Green Dot Corporation (GDOT) investors are still trying to pick up the pieces from the re-loadable pre-paid debit cards that has the company's stock price free-falling from $35.25 to $9.05 in the past year.

Last week, GDOT CEO Steven Streit bought $1.99 million worth of his company's stock.  Meanwhile, Director Ross Kendell stepped up with a smaller buy of 1,500 shares at $10.95 for $16,425. While Kendall's buy is small, it confirms Streit's purchase.

[Related -Target Corporation (TGT) Dividend Stock Analysis]

The buys stand out because insiders have done one of two things in the past two-years, sell or exercise options, with the last sale in march 2012, at $32.14;  since then, nothing but exercising options. The sudden buying could be interpreted as Kendell and Streit picking a bottom.

Green Dot gapped down from $23.32 to $9.06 from close-to-close, July 26 to 27. The pain was caused by 2nd quarter earnings that underwhelmed Wall Street. GDOT's price has bounced between an upper guardrail at $13-ish and a lower rail of support at $10-ish.

As we type, shares are struggling to bypass the 50-day average of $11.49. With the 12-day average bullishly crossing the 26-day, iStock thinks GDOT shares should get enough of a technical push to get by the key 50-day trend-line and back towards $13. Insiders could look really smart once the pre-paid debit card stock puts the unlucky number in the rear-view mirror. Once the stock price enters the vertical shaft created by the gap down, there is no technical debris all the way to $20.

Management does expect to see increased competition in the 4th quarter from the likes of Wal-Mart Stores Inc. (WMT), which launched its card in October. Maybe, just maybe, the initial results weren't as good as WMT hoped and as bad as GDOT detractors predicted.

Key metrics for GDOT were all higher in its most-recent quarterly report on November 1, 2012. The number of GPR cards activated, number of cash transfers, number of active cards, gross dollar volume, and purchase volume increased year-over-year.

If these trends continue in the fourth quarter and beyond, then iStock wouldn't expect Green Dot to trade at 9 times earnings for much longer. For next year, analysts forecast earnings to grow by 15.40 percent and revenues by 12.30 percent. At the minimum, we can see Green Dot trading at 12.3 times 2014's estimates of $1.42. The calculator puts the price-tag at $17.46 sometime in the next year.

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