GreenSky Inc: Beaten-Down Tech Stock Surprises With Strong Results

GreenSky Inc Surprises With Strong Results

GreenSky Inc Surprises to the Upside, Share Price Follows Suit

GreenSky Inc (NASDAQ:GSKY) surprised Wall Street with strong fourth-quarter results and a solid outlook for 2019. The tech stock took a massive beating back in November 2018, tumbling 35% after lowering its guidance outlook for the fourth quarter.

Rumors of GreenSky’s demise were greatly exaggerated. The GSKY stock price popped on March 5, 2019 after announcing its fourth-quarter results. While GreenSky stock still needs to climb roughly 14% to get back to where it was before the November sell-off, the company’s outlook for 2019 looks great.

Trading at around $13.15 at the time of this writing, the highest stock forecast for 2019 from the five analysts following GreenSky is just $14.00, with a median of $12.00.

A 2019 price forecast of at least $16.00 seems more plausible, however. That suggests a gain of at least 25% from its current levels.


GreenSky Inc Overview

GreenSky Inc is a leading financial technology company with a proprietary “Commerce at the Point of Sale” platform that serves 15,000 merchants across the United States.

The company’s platform results in strong recurring revenue, lower customer acquisition costs, and higher merchant retention rates. All of that provides GreenSky with growth and ongoing profitability for shareholders. (Source: “Fact Sheet,” GreenSky Inc, last accessed March 6, 2019.)

How does GreenSky make money?

GreenSky isn’t a bank; it is a banking partner that makes money on fees from transactions and loans. When looking at the company’s quarterly results, it’s important to pay attention to transaction volume, since it helps fuel the company’s revenue and profits.

GreenSky Stock Information
Market Cap $2.4 billion
52-Week High $27.01
52-Week Low $8.30
Shares Outstanding 57.4 million
Float 36.3 million
50-Day Moving Average $10.93
200-Day Moving Average $13.02

(Source: “GreenSky, Inc. (GSKY),” Yahoo! Finance, last accessed March 6, 2019.)

GreenSky only went public in May 2018, and it’s been mostly downhill since then.

At least it appears that GSKY stock stabilized for a few months starting in August. The bad news, of course, was that the markets sold off in October.

It didn’t help that, despite reporting record third-quarter results, the company reduced its 2018 outlook for transaction volume and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in November. (Source: “GreenSky, Inc. Reports Record Third Quarter Financial Results,” GreenSky Inc, November 6, 2018.)

Transaction volume for 2018 was expected to increase between 30% and 35% to between $4.9 and $5.1 billion. In the second quarter, management said it expected transaction volume to increase between 35% and 41% to between $5.1 and $5.3 billion.

Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) was forecast to increase between four percent and 10% to between $165.0 and $175.0 million. In the second quarter, it was projected to grow between 20% and 25% to a range of $192.0 and $199.0 million. (Source: Ibid.)

The company’s already battered share price faced additional headwinds in December when the markets swooned. However, GreenSky stock didn’t take too much of a hit in the last month of the year since it was still nursing its November knock-out.

That said, GreenSky ended 2018 down 58.4%.

The new year has given investors a reason to be optimistic though. Over the first two months of 2019, GSKY stock advanced 19.4%. It got a big boost on March 5 after the company reported solid year-end results that were near the high end of guidance.

On March 5, GreenSky stock hit an intra-day high of $13.50, for a year-to-date gain of 40.1%.

Chart courtesy of

Q4 Revenue Up 22%, Full-Year 2018 Revenue Up 27%

On March 5, 2019 GreenSky announced its financial results for the fourth quarter and full-year 2018. Fourth-quarter revenue increased 22% year-over-year to $109.7 million.

Transaction volume in the fourth quarter increased 23% over the same prior-year period to $1.3 billion. The average transaction fee rate for the fourth quarter rose to 7.1% from 6.9% in the prior quarter.

Fourth-quarter net income was $22.8 million, or $0.11 per share. Adjusted EBITDA was $33.1 million, compared to $48.5 million in the fourth quarter of 2017.

Full-year revenue advanced 27% year-over-year to $414.7 million.

Full-year transaction volume increased 34% to $5.0 billion. For fiscal-year 2018, the average transaction fee rate was 6.9% compared to 7.4% in fiscal 2017.

Net income for 2018 was $128.0 million, or $0.41 per share. Adjusted EBITDA for 2018 increased by eight percent to $171.5 million from $159.4 million in 2017.

Chairman and CEO of GreenSky David Zalik, said:

I am pleased with GreenSky’s solid fiscal 2018 operating results reported, consistent with guidance, and remain enthused with the prospects for continued outstanding growth and profitability as we enter fiscal 2019.

(Source: Ibid.)

To that end, in 2019, GreenSky reaffirmed the 2019 guidance it issued in November. That guidance includes an increase in transaction volume of between $6.4 and $6.8 billion and revenue growth of over 30%.

The company also anticipates pro forma net income to rise to between $128.0 and $140.0 million and adjusted EBITDA to rise between $210.0 and $225.0 million. (Source: Ibid.)

Analyst Take

After a tumultuous 2018, GreenSky sees calmer skies on the horizon. The company posted record third- and fourth-quarter results that were at the high end of guidance.

Those are the kind of numbers investors like to see. No one can predict what the broader markets will do—ever—but, all things being equal, investors should be able to look forward to GreenSky stock trending steadily higher in 2019.