Dave Inc. (DAVE Quick QuoteDAVE - Free Report) stock has shown remarkable growth over the past year. The stock has skyrocketed 416%, outperforming the industry's 77.2% rally and the Zacks S&P 500 composite's 17.7% growth.

DAVE’s performance is significantly higher than that of its close competitors, Upstart Holdings’ (UPST Quick QuoteUPST - Free Report) 75.7% growth and OppFi’s (OPFI Quick QuoteOPFI - Free Report) 141.9% surge.

1-Year Price Performance

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Dave’s recent performance paints a different picture. Its shares have declined 13.7% in the past month compared with industry's 10.4% growth and the Zacks S&P 500 composite's 3.3% growth. DAVE's recent decline signals that it is going through a correction phase. Meanwhile, OppFi and Upstart Holdings have lost 15.4% and 9.8%, respectively.

1-Month Price Performance

Image Source: Zacks Investment Research

Investors may find DAVE’s past year's share performance appealing. However, recent results may cause them to reconsider. Let us explore further to conclude what investors should do now.

DAVE’s Growing Membership Base

Dave’s rising membership base has served as a key driver of its financial performance in the second quarter of 2025. Monthly Transacting Members were 2.6 million, up 16% from the year-ago quarter. This growth corresponds to the addition of 722,000 new members, at an average customer acquisition cost of $19.

A 51% rally in ExtraCash originations in the quarter and 27% growth in Dave Debit Card are a testament to high customer engagement. This sustained member growth, coupled with an enhanced monetization strategy, led to a 64% year-over-year jump in revenues and a 236% upsurge in adjusted EBITDA, reinforcing confidence in the company’s outlook and continued expansion.

Inherently High Credit Risks Weigh on DAVE

DAVE’s core business model relies on providing small, interest-free cash advances to the underbanked population, who are often neglected by traditional banks. The ExtraCash advances are not subject to a conventional credit check, indicating a higher risk level.

Although Dave claims to have lowered credit risk by incorporating CashAI, its proprietary underwriting system, the company remains highly susceptible to macroeconomic headwinds.

The recent international tariff shakeup has impacted consumer costs, with prices moving 2.7% up in July from a year ago. This rising inflation results in lower disposable income for those who are living paycheck to paycheck. Such a situation increases the likelihood of consumer advances, leading to higher delinquency rates.

In the second quarter of 2025, DAVE reported a 28-day delinquency rate of 2.4%, higher than the year-ago quarter’s 2%. The fact that this metric has increased, even though slightly, is alarming.

The U.S. unemployment rate has moved up marginally to 4.2% in July from 4.1% in June. About 73,000 non-farm payroll jobs were added in July, significantly lower than the market expectation of 109,000. The U.S. job market slowdown signals higher default risks.

With the rising probability of interest rate cuts in the coming months, one may be bullish about the U.S. economy. However, the counteracting risks of higher inflation may trap DAVE users and the company in a loop of increased borrowing and higher default risks.

DAVE Faces Fierce Competition

Not only do neobanks but traditional ones also threaten Dave. The company caters to the same customer base, consisting of millennials and Gen Zs, who are tech-savvy and live paycheck to paycheck. Fintechs such as OppFi and Upstart Holdings offer similar services to DAVE’s. Therefore, in an expanding neobank market, Dave may find itself capturing a fair share of the market pie.

Competition moves up a notch when traditional banks come into play. While Dave’s primary motive is to target customers who want to avoid traditional bank fees, these banks are introducing offerings such as small-dollar loans and overdraft protection services that compete with fintechs.

To stay ahead of the pack, swift investment is the need of the hour. Considering DAVE does the needful, we can expect the company to find it difficult juggling between growth and profitability.

No Dividends: Dave’s Red Flag

Income-seeking investors find stocks with no scope for dividends unappealing. DAVE, operating since 2016, has never paid out dividends and does not plan to do so. Although reluctance to pay dividends is a vital feature of a growth-oriented company, investors seeking regular income may not find this enticing since return in the form of stock appreciation is not guaranteed.

Verdict for DAVE: Exit Your Position

Dave is successful at attracting more customers using its top-notch offerings. We expect sustained growth and expansion; however, the lingering credit risks threaten DAVE’s prospects. Unfavorable macroeconomic factors raise the probability of customer default.

That being said, competition is fierce as neobanks and traditional banks find a way out to capture market share, offering services similar to Dave’s. Finally, lack of dividends does not necessarily appeal to income-seeking investors.

We recommend investors who have gained from the stock’s long-term appreciation to book their profits, since the recent correction phase could slash returns. Potential buyers are urged to refrain from considering this stock for now.

DAVE currently sports a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.