It’s Not a Good Idea to Invest in Fintech Disruptor Dave Yet

Dave (NASDAQ:DAVE) stock represents an upstart fintech company that recently went public via a special purpose acquisition company (SPAC) merger. That transaction resulted in a $210 million PIPE investment at the business combination.

The logo for Dave (DAVE) is displayed

Source: Ricky Of The World /

That said, early indications aren’t particularly strong. It traded below $10 when the business combination occurred. It briefly made a resurgence in early February, topping $15 only to drop back below $5 in late February.

The question is two-fold: Will fintechs hold up to their promise of disrupting traditional finance, and can Dave make a dent in that space?

What Do We Know About Dave?

Investors are likely to continue to shy away from DAVE stock for a few reasons. First of all, fintech companies simply aren’t likely to garner much attention in the current macroeconomic environment. Inflation figures and the Federal Reserve response are going to ensure that for at least a few months.

But more to the point, it’s difficult to find much information about Dave. We know it’s a fintech company that’s fighting for the little guy. It takes its name from the David and Goliath story. We know the company clearly believes the millennial friendly banking app will achieve that goal by serving its 10 million members. Its no fee banking appeals to its core demographic, which doesn’t bank in the same way previous generations did.

But there isn’t that much information about its financial situation if you’d like to make an informed investment decision.

Investors do know that Dave had higher operating expenses than it had revenues through the first nine months of 2021. The fact that total operating expenses reached $144 million while revenues reached only $112 million won’t attract investors either. The result was that Dave posted a net expense total of $27 million.

That leaves bullish investors simply hoping that the proceeds Dave received from the de-SPAC will fund a turnaround. Is $389 million in cash on its balance sheet at deal closing enough to make Dave attractive moving forward?

The Big Question for DAVE Stock

The company’s investor presentation from last summer provides some insight into what to expect. Although that slide deck is from a while ago it did predict that the company would report $377 million in sales in 2022.

The problem is this: It’s difficult to extrapolate anything positive from that from the perspective of investors. If we take the first nine months of 2021 as a representation of 2022 then investors have reason to be worried.

Remember, Dave posted $144 million in operating expenses on $112 million in top line revenue through the first nine months of 2021. That implies that Dave might post $485 million in operating expenses through 2022 while only recording $377 million in sales. That would result in a $108 million operational loss.

Is that likely to occur? The answer is, of course, that no one really knows. 2022 won’t exactly mirror the first nine months of 2021 for the company. But if performance is similar then it really looks grim for the company.

That’s why investors probably aren’t going to care about DAVE stock until it provides them more information.

What to Do With DAVE Stock

The thing is that Dave posted a profit through the first nine months of 2020. But investors have little else by which to reasonably judge the company. It showed a profit for 2020 and then it didn’t in 2021 through the same period.

The notion that it could post $377 million in revenues in 2022 means little without the ability to discern whether that results in a profit or a loss.

Wait for Dave to provide full year results for 2021 before taking action on those earlier $377 million 2022 revenue expectations. If those expectations come to pass, it could be a positive, or it could mean very little in terms of making DAVE stock more attractive.

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On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

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