Analysis: The news from American Express and Wal-Mart could be the nail in the coffin for Green Dot. Not only has growth slowed as evidenced by its prior earnings report, but severe reductions in revenue and profits may very well be a permanent part of Green Dot’s future. When a company loses more than half of its value, investors should have been on red alert. Financial companies are fragile entities and market conditions can change quickly. That seems to be the case with Green Dot. What should a trader do today? While growth may be deteriorating, Green Dot will not go away quietly. The company has more than $8 per share in book value, and, despite a deterioration in earnings, is nowhere near losing money. After today’s downturn, long-term investors might deem shares to be attractive. From a trading perspective, these sorts of sharp downturns have been followed by recovery later in the day.
Action: Let the whitewash happen in the morning. Look to acquire shares after an hour or two of trading for a 5%-10% rebound in share price before the close.
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