Today’s Barchart’s Top 100 Stocks to Buy commentary is about Dave Inc. (DAVE), a digital financial services platform and neobank that helps deliver a superior banking experience for people living paycheck to paycheck.

That’s an admirable mission to be sure. Too many financial products are designed for fat cats who don’t need any help. This difference appeals to the anti-establishment in me. 

Founded in May 2016 by CEO Jason Wilk, the company’s banking app now has 12.4 million members, with 569,000 added in Q1 2025 alone. 

In yesterday’s trading, DAVE stock moved up 23 spots in Barchart’s Top 100 Stocks to Buy, to 66th place, gaining 2.8% on the day. 

Meanwhile, the S&P 500 gained 3.3%, five basis points more than DAVE, a possible sign its 2025 gains could be nearing an end. Or, it could be on the road to greatness. 

Here’s why it’s the latter rather than the former.  

Pathway to Profitability

Shark Tank personality Mark Cuban invested $3 million in its seed funding due to its focus on overdraft fees, which Cuban has said hurt his financial situation when he was in his 20s.

Dave went public in January 2022, five and a half years after its founding, merging with VPC Impact Acquisition Holdings III, a special purpose acquisition company (SPAC). 

SPACs often go public by selling units at $1o each. VPC Impact Acquisition Holdings III sold 22.5 million units in March 2021. It closed its business combination with Dave in less than 12 months.

By early 2023, DAVE stock traded several dollars below the SPAC’s IPO price, as operating losses increased, and the shorts began to circle. 

“‘Our path to profitability is a pretty simple story. We are improving our margins,’ Wilk told a conference of investors in June 2023. ‘Once we’re at 2.2 million to 2.4 million members, the company is now profitable.’” Sherwood News reported CEO Jason Wilk’s 2023 comments. 

So, in two years, it has taken its monthly transacting members (MTM) from 2.0 million in Q1 2023--which is the number Wilk’s referencing in the quote above-- to 2.5 million in Q1 2025, a compound annual growth rate (CAGR) of 11.8%. 

That might not seem like a lot, but it was enough to go from a $14.0 million GAAP loss in Q1 2023 to a $28.8 million GAAP profit in Q1 2025.

Fast Forward to Today

Dave reported its first quarter results on May 8. Due to the excellent news, its shares are up nearly 60% in less than a week. 

Buyers as recently as January 2024 have generated a 17-fold return in just 15 months. 

Isn’t it too late? 

Sure, its weighted alpha of 117.96 is less than half its 52-week return of 250.21%. However, the weighted alpha weighting moves higher based on more recent price activity, suggesting it should increase in the days ahead, hence the 23-spot move yesterday.  

Back to the quarter in the books. Three things stand out.  

1. A 47% increase in revenue to $108 million.

2. A 235% increase in adjusted EBITDA to $44.2 million. 

3. A 900 basis-point increase in its non-GAAP variable profit, defined as non-GAAP variable profit divided by GAAP operating revenue. 

The most impressive thing about the third point is that its non-GAAP variable operating expenses increased by 3.8%. In comparison, revenues rose 47%, indicating that Dave has paid close attention to its operating expenses while accelerating top-line growth. 

As a result, the company expects its 2025 GAAP operating revenues to increase 35% at the midpoint of its guidance, to $467.5 million, while its adjusted EBITDA is expected to grow 85% to $160 million, a 34.2% margin. 

That seems conservative given its last four quarters have seen adjusted EBITDA margins of 40.9%, 33.1%, 26.7%, and 19.0%. 

The company estimates its total addressable market at 180 million Americans, up from 165 million in 2021. Its current market share is 6.9% and is likely to grow. 

The Fly in the Ointment for DAVE Stock

I’m confident they are exceptionally high without looking at their valuation metrics. 

For example, its enterprise value of $2.27 billion is 3.56x its sales. At the end of 2023, it was 0.34, or one-tenth what it is today. Its price-to-book value is 6.62x, six-fold higher than at the end of 2023. 

Its share price at the end of 2023 was $8.39, about one-twentieth what it is today. 

I don’t think there’s any question about whether a bet on DAVE stock assumes that it will grow into the valuation multiples it currently enjoys.

The risk is twofold: Multiple expansion, or at least maintaining current multiples with expanded revenues and profits, doesn’t happen; and the opportunity cost of investing in Dave instead of some other high-growth fintech stock.

If you’re a risk-averse investor, I’m not sure you’ll be comfortable with the valuation risk/reward. 

However, an aggressive investor should consider taking a position. The opportunity for above-average returns beyond those achieved in the past two years is significant. 

To generate income while getting a better entry point, consider selling June 20 $135 puts. As I write this, the bid price of $2.20 would generate an annualized return of 15% [$2.20 bid / $135 strike price * 365 / 39 days to expiration]. 

The risk here is that its share price volatility moves quickly to the downside. The $135 strike’s IV (implied volatility) is 70.94%,  which means its shares have traded below $174.47 about 71% of the time over the past 52 weeks. 

As I said, this is a bet only aggressive investors should consider, but I like where the business is headed.