DAVE Rallies 133% YTD: Is Acquiring the Stock Now Justified?
The stock has outpaced its industry peers, CoreCard CCRD and Qifu Technology QFIN. CoreCard and Qifu Technology have gained 24.1% and 10.5%, respectively, over the same period.
YTD Price Performance
Image Source: Zacks Investment Research
DAVE has outperformed its industry peers in the past three months as well. Dave has skyrocketed 140.3%, exceeding CoreCard's and Qifu Technology's 38.9% and 47.6% growth, respectively.
The stock's performance over the past three months and the year-to-date period is noteworthy, spiking investors' interest, prompting them to buy the shares for the long run. Let us assess DAVE's performance to conclude whether it deserves a place in investors' portfolios.
Dave's ExtraCash: Guiding Through the Neobank Market
The underbanked demography is often neglected by traditional banks, forcing them to find shade under neobanks. Hence, the rising needs of these non-prime/sub-prime consumers become a driving force in the neobank market, such that currently it is anticipated to expand, seeing a CAGR of 40.3% from 2025 to 2034.
DAVE, one of the leading names in the neobank market, meets the rising demand of the underbanked through ExtraCash. This service addresses the challenges faced by the underbanked by offering interest-free cash advances up to $500. What appeals to consumers is that there are no traditional credit checks. Dave assesses bank account history and spending patterns to determine customers' creditworthiness, enabling the company to extend credit to sub-prime or non-prime consumers with limited credit history.
The company simplified its optional fee model, wherein consumers will pay a 5% fee with a $5 minimum and a $15 cap. This brand-new fee structure enhances transparency around ExtraCash advances, strengthening the company's position among the underbanked. Since consumers can avail of ExtraCash via DAVE's mobile-first platform, we expect the rising popularity of mobile banking to provide an impetus to the company's gains.
The risk profile of a consumer who uses ExtraCash may concern investors. To reduce the risks, DAVE has implemented CashAI, its proprietary underwriting engine. This technology has improved customer engagement, with ExtraCash originations increasing 46% year over year to $1.5 billion during the recent March quarter. A tell-tale sign of CashAI's success is the increase in the company's 28-day delinquency rate by 33 basis points year over year in the first quarter of 2025.
DAVE: Discounted With Solid Financials
Dave shares appear cheap, raising a green flag for investors. The stock is currently priced at 19.74X forward 12-month earnings per share, lower than the industry's average of 23.35X.
Image Source: Zacks Investment Research
The return on equity (ROE) and return on invested capital (ROIC) capture DAVE's impressive profitability position. Currently, the company's trailing 12-month ROE stands at 59.2% way above the industry average of 6.6%. In terms of ROIC, Dave's 26.7% looks promising when compared with the industry's -8.5%.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
Dave's striking liquidity position should reassure investors of the company's solid financial position. In the recent March quarter, the company's current ratio of 8.59 exceeded the industry average of 1.84, increasing 15% from the year-ago quarter on the back of higher ExtraCash receivables. A current ratio exceeding 1 suggests that the company can cover short-term obligations effectively.
Image Source: Zacks Investment Research
Dave's Top & Bottom-Line Outlook Appears Promising
The Zacks Consensus Estimate for the company's 2025 revenues is $475.8 million, suggesting a 36.7% rise from the prior-year reported level. For 2026, revenues are estimated to increase 23.8% year over year. The consensus estimate for 2025 earnings per share is $8.76, hinting at a 67.2% surge from the year-ago reported level. The same is anticipated to rise 35.1% year over year in 2026.
Verdict: Buy DAVE Now
Dave appears to be a compelling investment opportunity for now. ExtraCash, which is the company's main product, is successful at catering to the growing needs of the underbanked in an expanding neobank market. The company has simplified its fee structure, strengthening its position. Dave's CashAI has shown promising results in reducing credit risk, steering away from the talks serving risky profiles.
The company's optimistic top and bottom-line outlook reflects its strong fundamentals. With that, the stock possesses a discounted valuation, which captures investors' attention. A strong profitability and liquidity position should reassure investors about the company's robust financials.
Taking all these factors into consideration, we recommend that investors buy the stock right now and expect a significant return in the long run.
DAVE sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.
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Dave Inc. (DAVE) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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