Eric Jackson might not get the same level of coverage as other high-profile hedge fund managers, but, as founder of EMJ Capital, Jackson has built a reputation for discovering asymmetric compounders before other analysts on Wall Street.
Most famously, Jackson made a bullish bet on Carvana stock when it traded for just $3.50. Carvana later surged over 100x and reached $413 per share. Last summer, Jackson was at it again. He went long on Opendoor Technologies when it traded as a penny stock, only to see it run up to about $10.
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His latest bull call is Dave (NASDAQ: DAVE), a fintech that he says the market prices more like a traditional bank even as the business transforms into a high-margin payments toll booth. Could Dave be the next stock to go parabolic?
Dave helps paycheck-to-paycheck workers through its flagship product, ExtraCash, which offers members instant advances of up to $500 that get automatically repaid from the user’s next paycheck. As a differentiator from a traditional bank, Dave does not conduct credit checks or apply interest charges and late fees. Instead, Dave employs a flat fee of $5 or 5% of the transaction, plus a $3 monthly subscription.
ExtraCash is powered by CashAI, Dave’s AI underwriting model that analyzes data points such as cash flow instead of credit scores as well as income, employment history, spending patterns, and bank balances. Complementing CashAI is DaveGPT, the company’s generative AI assistant, which provides real-time conversational support for ExtraCash users.
Dave is in the final stages of migrating its ExtraCash receivables to an off-balance-sheet structure with Coastal Community Bank. Under the partnership, Coastal will fund advances and carry the receivables on its own books while Dave continues originating and underwriting.
This shift de-risks Dave’s model, as the company currently ties up roughly $200 million of its own cash to fund the receivables held on its balance sheet. Post-migration, credit risk moves to Coastal’s bank, reducing Dave’s exposure to collection losses or duration risk on the advances.
Dave is essentially reorganizing as a fee-based originator like Visa or Mastercard. In theory, this balance sheet cleanup should unlock free cash flow that Dave can use for new growth opportunities and shareholder return programs.
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