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Here's Why You Should Retain Green Dot (GDOT) Stock Now

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Green Dot Corporation (GDOT - Free Report) is benefiting from its well-established relationship with Walmart (WMT - Free Report) and a strong cash position. Increasing operating expenses are a concern.

For 2021 and 2022, the company’s revenues are expected to grow at a rate of 8.6% and 10%, respectively, on a year-over-year basis.

Factors That Auger Well

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’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.

Moreover, the company’s cash, cash equivalents and restricted cash balance at the end of first-quarter 2021 was $2.7 billion with no debt to clear off. This strong cash position enables the company to invest in opportunities that hold true potential.

Risks Associated

Green Dot is encountering higher expenses as it continues to invest in sales, marketing and product development. In the first quarter, total operating expenses rose 18.5% year over year to $359.5 million.

Additionally, the company faces tough competition from companies across financial services, financial technology services, retail banking, transaction processing and consumer technology industries.  

Zacks Rank and Stocks to Consider

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

Some better-ranked stocks in the broader Zacks Business Services sector can also consider stocks like Equifax Inc. (EFX - Free Report) and Cross Country Healthcare (CCRN - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

The long-term expected earnings per share (three to five years) growth rate for Equifax and Cross Country Healthcare is pegged at 14% and 10.5%, respectively.

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