Dave Inc ($DAVE) is Mis-understood, and offers 100% Upside in 24 months
A scaled, mis-understood neo-bank, with a compelling product that's still undervalued, even after a 700% run in the last 12 months.
Disclosure: At the time of writing, DAVE is the 2nd largest position in my portfolio. I may add, reduce, or sell my position without notice. This write-up is strictly informative, includes my opinions and does not constitute as financial advice. Please do your own due diligence.
What I’m Drawn To:
An easy to understand, asset-light business with high FCF conversion
An Earned Wage Access product that’s structurally superior and more ethically bound to the incumbent, payday lenders
Currently accelerating top line at 47% YoY, profitably with immense operating leverage
Highly scalable model, with proven low CAC rates… 30% of new customers coming from word-of-mouth!
Associated Risks / Pre-Mortem:
Rapid increase in unemployment
Credit environment deteriorates, as customer default rates rise substantially
A growing regulatory backlash toward the EWA industry, with policy makers taking aim at reforming the industry further
Rising customer acquisition costs, likely due to deteriorating marketing ROI / increased competitive pressures
Di-worst-ifying revenue to lower margin cross-sell initiatives instead of continuing to scale the EWA business
Continued shareholder dilution (not egregious, 6% in the last 12 months)
Before diving into DAVE, I want to set the expectations for my write-ups, moving forth. As discussed in a previous tweet (follow me if you aren’t):
I am seeing an influx of stock write-ups with basic 10-K summaries, lacking a distinct thesis, timeframe, and expectation. I want to change that on FinStack (Finance Substack). Now to DAVE…
Simple Business Overview:
DAVE, named after “David” vs. the Goliath’s of banking, is a B2C neo-bank providing Earned Wage Access (EWA) services to the underbanked. Dave is a modern alternative to payday lending, providing short-term cash advances up to $500 at a time, with limits personalized to a customers financial data. This service is provided in the form of instant transfer into a checking account. There is a flat 5% up-charge for EWA advances, a stark contrast to the 200-400% APR’s seen with traditional payday lending.
These products are underwritten with Plaid API’s, providing visibility into 6 months of transaction data and direct deposits, while requiring no hard credit check. Dave also offers a run-of-the-mill checking account that won’t be core to this write-up. The Plaid partnership grants DAVE the right to sweep what is owed from a user’s account without notice / approval. This is different from a credit card or traditional lender, as they sit lower in the repayment stack, and lack the ability to conduct a sweep, based on future paycheck.
As of latest, Q1 ‘25, Dave originated $1.53 Billion (up 46% YoY), and grew sales at 47% YoY. They’re also growing profitably, and maintaining a very impressive 28-day delinquency rate of 1.50%, a 33 bps improvement YoY. However, Q1 is a seasonally low delinquency rate, as lower income consumers get tax refunds, which also contributes to lower origination volume than following quarters (see below).
Another notable factor driving the flywheel is the uber low Customer Acquisition Cost (CAC) of $18. In the latest Q1 ’25, the average advance was $192. The average revenue per advance is $0.072 per $1, or $13.80 of revenue per the average $192 of advance. Meaning, that if a new customer conducts just one EWA advance, DAVE yields a 76.6% return on ad spend (ROAS).
When applying this data point to Q1 ‘24, the average advance was $159 and the CAC was $16. At an origination volume of $1.05B, sales of $73.6M, that’s an average revenue per advance of $0.07 per $1, or $11.13. Meaning, a new customer would yield a 69.5% ROAS. Amazingly, even as CAC increases, and the rate of growth accelerates, DAVE’s average revenue per advance is increasing at a greater rate than it was a year ago.
Competitors:
Although many “neo-bank” labels are thrown around in markets today, only a handful of competitors offer EWA services, like DAVE. MoneyLion was recently acquired, as a failing neo-bank, with a brutal loss rate. EarnIn is a sub-scale competitor, at an estimated annual revenue of: $90 Million, that faced regulatory action from the D.C. Attorney General in 2024: LINK. EarnIn does have one of the highest origination volumes in the space, but continually struggles with underwriting, and loss ratio.
There are other B2B2C players, like DailyPay, PayActiv, Juice Financial, and Tapcheck, however, these are not direct comps in my view. Lastly, the most known competitor is recently IPO’d, Chime Financial. CHYM benefits from being the first-mover in the neo-bank industry, with a strong brand name. However, they only launched their EWA service in May ‘24. Chime spent ~$520M in 2024 on sales & marketing, a 17% YoY increase, and acquired customers at a $109 cost in their S-1, over 6x less efficient than DAVE. They claim when stripping brand marketing expenses, their CAC was $91, but this is a questionable metric. CHYM is taking a different approach, aiming to build relationships with customers via checking accounts for long commitments, making the CAC metrics an imperfect comparison.
DAVE is still positioned as the EWA leader with the largest dataset, credit transactions, and is the only truly scaled underwriter in the space.
Want to give a shoutout to my friends Garzy and Andrew for helping with the research and finding this pitch! Follow Andrew on X: @AndrewM61370616
Competitive Advantages:
Similar to many neo-banks, DAVE does not underwrite based on credit score. Given that EWA advances are small dollar products, credit scores wouldn’t accurately reflect a customers risk profile. Similar to Acorns, DAVE is using Plaid, which provides 6 months of past transaction data to validate a customers next payment date, with the goal of providing credit without the necessity for a credit pull.
The average duration of an EWA advance is 8 days, meaning credit turnover is so fast that the models they use to underwrite are seeing new data in very quick succession. Take this in context to a more rigid loan provider, which can’t determine the efficacy of their models as quickly, maybe every 6 months. There’s a notable data advantage from the fast transactions periods and being the highest scale provider in the industry.
This can be seen, as their gross margins have risen from low 40% in 2022 to 72% last quarter. They’re growing at a faster pace, at a higher run rate, with loss ratios declining! Part of being the scaled leader is brand, in which 30% of customers originate from word of mouth. But even more impactful is the ability to analyze more customer cash flow data, merchant data, ATM data, and feed their underwriting system to more accurately reflect consumer risk.
Why Now / Valuation:
For the lazy investor, DAVE shares have moved over 700% in the last 12 months, with most putting it in the “missed it” bucket. DAVE is still a former SPAC with limited analyst coverage, but despite the daunting chart, shares are still cheap.
Let me provide some historical context… in November 2024, the FTC filed a lawsuit against DAVE’s EWA product, alleging undisclosed fees and “tipping” without user consent. They also accused Dave of enrolling customers in a monthly subscription without an easy cancellation. Why’s this relevant?
It’s relevant because DAVE has removed their tipping fee on EWA advances and converted to a flat 5% fee, with a $5 minimum and $15 maximum per transaction. These transparency changes were completed and took effect in February 2025. Not only does this remove the regulatory heat, but their business has actually improved! Their models are still being tweaked, but their revenue predictability has improved, they have accelerated top-line growth, at a higher scale, and are more profitable than before. The market hasn’t caught onto this change, and doesn’t realize that their EWA business will offer even higher quality growth than before.
My assumptions for FY’25 have DAVE growing sales 38%+ YoY (which could prove to be conservative). I think they can do ~$190M in FCF, which would leave shares at ~19x FY’25 FCF. Looking out to 2026, I think that number is ~$270M in FCF or ~13x 2026 FCF.
Given the fixed-cost nature of their business, FCF margins will likely increase, as more incremental dollars trickle down to the bottom line. There’s not many uses for the capital at this time. They’re profitable, investing a healthy, not egregious amount in marketing. And management just announced a $50M buyback agreement in Q1, to boot.
Personally, I still see another 100% upside for DAVE shares in the next 24 months. I have growth slowing to 28% in 2026. However, I believe a re-rating will take place, as ~19x FCF is unreasonably cheap, given their industry status and excellent YoY growth. I expect more price discovery to occur, and more analysts to drive buying to the name.
Concluding Thoughts:
DAVE is currently my 2nd largest position, a ~13% allocation at a $224 cost basis. Shares have run up during this writeup, but Dave is the clear scaled winner in the EWA product market, with more addressable market to penetrate. This is a superior offering for customers, a more transparent model for regulators, and an inflecting business, with large operating leverage for shareholders. With an improved model for underwriting, more predictable AI, and low CAC, DAVE will be a winner for years to come, and is still cheap, relative to growth and FCF predictability.
Sources:
2025: YouTube Interview w/ CEO, Jason Wilk: LINK
2025: Spotify Interview w/ Jason Wilk: LINK
Dave FTC Lawsuit: LINK
Statement on New Fee Structure: LINK
EarnIn Lawsuit: LINK
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God bless.