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Should You Add DAVE Stock to Your Portfolio Pre-Q2 Earnings?
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Key Takeaways
{\"0\":\"DAVE is set to report Q2 earnings on Aug. 6, with EPS expected to surge 88.1% y/y.\",\"1\":\"A new flat-fee model and a 46% rise in ExtraCash origination may fuel revenue growth.\",\"2\":\"Despite a 661.1% stock upsurge, DAVEs subprime focus and high valuation call for investor caution.\"}
The consensus estimate for total earnings is pinned at $1.9 per share, indicating an 88.1% surge from the year-ago quarter’s actual.
The Zacks Consensus Estimate for revenues in the to-be-reported quarter is pegged at $112.7 million, suggesting 40.7% growth on a year-over-year basis. One estimate for the quarter has moved south in the past 60 days, versus no northward revision.
Image Source: Zacks Investment Research
DAVE has an impressive earnings surprise history. In the four trailing quarters, it surpassed the Zacks Consensus Estimate, with an average surprise of 274.5%.
Dave Showcases Lesser Chances of Posting Q2 Earnings Beat
Our proven model does not conclusively predict an earnings beat for DAVE this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
In the first quarter of 2025, DAVE had 12.4 million members, 569,000 more members than in the year-ago quarter. The new fee structure of a flat 5% fee on all ExtraCash transactions, with a minimum $5 fee and a $15 cap, eliminates the optional tips. This simpler fee structure has improved monetization and conversion rates while maintaining robust member retention (per Jason Wilk, CEO). We expect this plan to have positive long-term impacts on user acquisition.
Dave Stock Soars
DAVE shares have exploded 661.1% in a year, outperforming the 71.2% surge of its industry and 20.8% growth of the Zacks S&P 500 composite. The company has performed better than its industry peers, Jamf (JAMF - Free Report) and Inspired Entertainment (INSE - Free Report) . Jamf has declined 53.6%, while Inspired Entertainment has gained 15.3% in a year.
1-Year Price Performance
Image Source: Zacks Investment Research
Dave’s stock is currently trading at a trailing 12-month price-to-earnings ratio of 22.01X, slightly below the industry’s 22.9X. However, the stock looks pricier than Jamf and Inspired Entertainment. JAMF and INSE are currently trading at 8.2X and 14.52X, respectively.
P/E - F12M
Image Source: Zacks Investment Research
DAVE’s Investment Considerations
Dave’s profitability is impressive, with a trailing 12-month ROE of 59.2%, significantly higher than the industry’s 6.7%. In terms of ROIC, Dave’s 26.7% is way higher than the industry’s -8.5%. Furthermore, the company has a remarkable liquidity position with a current ratio of 8.59, way higher than the industry’s 1.84. A current ratio of more than 1 implies that the company can pay off short-term obligations easily.
DAVE is a lifesaver for the underbanked population, who are often ignored by traditional banks. With the expanding neobank market and growing popularity of mobile banking, we are anticipating a huge opportunity for the company to grow in the foreseeable future.
The company has implemented CashAI, its proprietary underwriting, to address the high credit risks. This technology has successfully improved customer engagement with ExtraCash origination, improving 46% year over year to $1.5 billion in the first quarter of 2025.
Despite these positives, DAVE’s target market poses the highest threat to its business. Providing credit to subprime or non-prime customers carries a high risk of default. Although the company has taken enough precautionary measures to ensure that credit risk is minimized, investors may still be pessimistic about its future, given that there may be other stocks with a low-risk profile in the fintech domain.
Verdict
Dave’s ExtraCash has been a huge success with its new simplified fee structure. It is highly appealing to customers, benefiting its top line. The company’s AI-based underwriting technology assists in scrutinizing customers’ credit profiles efficiently, thus minimizing credit risk.
Although the company has a high profitability and liquidity position, appealing to investors, its high valuation compared with its industry peers may raise red flags. Furthermore, DAVE operates a risky business model by serving the subprime and non-prime customers, and has a low probability of an earnings beat.
Weighing on these pros and cons, we recommend that investors have a cautious approach. Those who already hold this stock in their portfolios are urged not to invest further, and those who are contemplating buying must wait till the earnings release to assess its movement.
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Should You Add DAVE Stock to Your Portfolio Pre-Q2 Earnings?
Key Takeaways
Dave Inc. (DAVE - Free Report) will report second-quarter 2025 results on Aug. 6, after market close.
The consensus estimate for total earnings is pinned at $1.9 per share, indicating an 88.1% surge from the year-ago quarter’s actual.
The Zacks Consensus Estimate for revenues in the to-be-reported quarter is pegged at $112.7 million, suggesting 40.7% growth on a year-over-year basis. One estimate for the quarter has moved south in the past 60 days, versus no northward revision.
DAVE has an impressive earnings surprise history. In the four trailing quarters, it surpassed the Zacks Consensus Estimate, with an average surprise of 274.5%.
Dave Inc. Price and EPS Surprise
Dave Inc. price-eps-surprise | Dave Inc. Quote
Dave Showcases Lesser Chances of Posting Q2 Earnings Beat
Our proven model does not conclusively predict an earnings beat for DAVE this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Dave has an Earnings ESP of -22.43% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Member Growth to Have Been DAVE’s Drivers in Q2
In the first quarter of 2025, DAVE had 12.4 million members, 569,000 more members than in the year-ago quarter. The new fee structure of a flat 5% fee on all ExtraCash transactions, with a minimum $5 fee and a $15 cap, eliminates the optional tips. This simpler fee structure has improved monetization and conversion rates while maintaining robust member retention (per Jason Wilk, CEO). We expect this plan to have positive long-term impacts on user acquisition.
Dave Stock Soars
DAVE shares have exploded 661.1% in a year, outperforming the 71.2% surge of its industry and 20.8% growth of the Zacks S&P 500 composite. The company has performed better than its industry peers, Jamf (JAMF - Free Report) and Inspired Entertainment (INSE - Free Report) . Jamf has declined 53.6%, while Inspired Entertainment has gained 15.3% in a year.
1-Year Price Performance
Dave’s stock is currently trading at a trailing 12-month price-to-earnings ratio of 22.01X, slightly below the industry’s 22.9X. However, the stock looks pricier than Jamf and Inspired Entertainment. JAMF and INSE are currently trading at 8.2X and 14.52X, respectively.
P/E - F12M
DAVE’s Investment Considerations
Dave’s profitability is impressive, with a trailing 12-month ROE of 59.2%, significantly higher than the industry’s 6.7%. In terms of ROIC, Dave’s 26.7% is way higher than the industry’s -8.5%. Furthermore, the company has a remarkable liquidity position with a current ratio of 8.59, way higher than the industry’s 1.84. A current ratio of more than 1 implies that the company can pay off short-term obligations easily.
DAVE is a lifesaver for the underbanked population, who are often ignored by traditional banks. With the expanding neobank market and growing popularity of mobile banking, we are anticipating a huge opportunity for the company to grow in the foreseeable future.
The company has implemented CashAI, its proprietary underwriting, to address the high credit risks. This technology has successfully improved customer engagement with ExtraCash origination, improving 46% year over year to $1.5 billion in the first quarter of 2025.
Despite these positives, DAVE’s target market poses the highest threat to its business. Providing credit to subprime or non-prime customers carries a high risk of default. Although the company has taken enough precautionary measures to ensure that credit risk is minimized, investors may still be pessimistic about its future, given that there may be other stocks with a low-risk profile in the fintech domain.
Verdict
Dave’s ExtraCash has been a huge success with its new simplified fee structure. It is highly appealing to customers, benefiting its top line. The company’s AI-based underwriting technology assists in scrutinizing customers’ credit profiles efficiently, thus minimizing credit risk.
Although the company has a high profitability and liquidity position, appealing to investors, its high valuation compared with its industry peers may raise red flags. Furthermore, DAVE operates a risky business model by serving the subprime and non-prime customers, and has a low probability of an earnings beat.
Weighing on these pros and cons, we recommend that investors have a cautious approach. Those who already hold this stock in their portfolios are urged not to invest further, and those who are contemplating buying must wait till the earnings release to assess its movement.