In recent years, multi-baggers have generally been associated with the artificial intelligence (AI) megatrend, which is fronted by mammoth stocks like Nvidia (NVDA) and Meta Platforms (META). Meanwhile, AI-fueled financials have been somewhat of a laggard. This is due to myriad issues, but chief among them are high interest rates, stressed consumer wallets, and the Silicon Valley Bank crisis putting a dent in confidence. Moreover, with the market's AI-era gains largely fueled by a relatively small handful of tech giants, many stocks were overlooked as investors piled into the market leaders.
However, one standout in the fintech group is Dave Inc. (DAVE), with the stock now sporting a 52-week gain of 1,273%.
About Dave Stock
Founded as recently as 2016, California-based Dave (DAVE) is a financial technology (fintech) company that offers a mobile app designed to help users improve their financial health. Its primary services include Banking Services, Financial Insights and ExtraCash. The company went public via SPAC merger in January 2022, and currently has a market cap of $988 million.
A member of the Russell 2000 Index (RUT), small-cap DAVE stock has been a stark outperformer in 2024, zooming a staggering 882.9% on a YTD basis. This makes AI darling Nvidia's rise of 196.2% in the same period look modest by comparison.
That said, DAVE has already pulled back 13% from its mid-November highs, set earlier this month - which means investors can technically buy the dip in this outperforming AI stock right now.
DAVE's Blockbuster Q3
The recent catalyst for DAVE's new high was a 44% rise in a single day on Nov. 13, sparked by the fintech's Q3 results.
In the most recent quarter, Dave beat consensus estimates on both revenue and earnings, while also raising its revenue guidance for the full year. Net operating revenues surged by 41% from the previous year to $92.5 million, while the company moved into the black with earnings per share (EPS) of $1.51, compared to a loss of $0.47 per share in the year-ago period. Notably, this marked the third consecutive quarterly earnings beat from DAVE.
The strong growth in revenue and earnings was driven by a notable improvement in key operating metrics during Q3, including a 4% increase in new members to 854,000. Monthly transacting members increased 23% from the year-ago period to 2.4 million, reflecting growing consumer engagement with the company's platforms. ExtraCash originations increased 46% to $1.4 billion, while the average 28-day delinquency rate improved 64 basis points to 1.78%. Lastly, Debit Card spend increased 19% to $407 million.
Based on Q3's financial and operational strength, Dave raised its revenue guidance to a range between $340 million and $343 million, up from $310 million to $325 million previously. The company now expects adjusted EBITDA to range between $71 million and $74 million, an improvement from its earlier guidance of $40 million to $50 million.
The Strategic Edge for DAVE
Dave provides a compelling value proposition through affordable and quick access to cash, catering to individuals who need immediate funds. Its flagship service, "ExtraCash," offers short-term cash advances, helping users to bridge financial gaps between paychecks without incurring costly overdraft fees. By leveraging a fully automated machine learning (ML) algorithm that analyzes historical spending, savings, and earnings patterns, Dave ensures efficient disbursement of advances, while maintaining strong credit quality.
The so-called “neobank” has successfully reduced its customer acquisition costs while achieving high growth in originations. At $15, its customer acquisition cost is significantly lower than legacy banks, which average around $500. Additionally, Dave avoids charging fees or overdraft costs, enhancing its appeal to cost-conscious customers.
The platform’s ease of use and flexibility have driven strong customer engagement. This strong customer connection facilitates cross-selling other financial products with minimal effort.
Finally, Dave's early adoption of artificial intelligence further sets it apart. AI powers its credit models, determining eligibility and amounts for cash advances, and streamlines its call center operations, resolving 90% of tickets without human intervention. These efficiencies enable Dave to offer superior customer service at a lower price point than competitors.
How Do Analysts Rate Dave?
Given its nimble operations and balance sheet strength, along with a large addressable market, it's no surprise to find analysts are all in on DAVE stock.
Six analysts have unanimously given the shares a rating of “Strong Buy,” although Dave has surpassed their average price target of $78.67. The Street-high target price of $115 suggests an upside potential of about 39% from current levels.
