Both Spotify Technology S.A. SPOT and Dave Inc. DAVE are app-based platform companies disrupting traditional industries. While SPOT aims at shaking the music and audio streaming domain, DAVE finds itself tackling the personal finance and banking ecosystem. Both companies target a massive tech-laced user base with subscriptions or freemium models, navigating the path to profitability via scale and product expansion.

The comparative analysis of these two companies might serve well for investors looking to dip their hands in stocks with the tendency to rattle traditional industries.

The Case for Dave

DAVE, the digital banking service provider, has a subscription-based model with members paying $5 per month. This provides customers with access to valuable services, including ExtraCash, Income Opportunity Service and Financial Management Services at their fingertips. Dave offers customers the opportunity to cash in up to $500, which is used to avoid overdraft fees and daily use. Customers who seek payday loans turn to DAVE rather than traditional banks.

The company allows its customers to avail cash advances via three different methods. Firstly, customers can use the Dave card for instant transactions by paying a 3% fee, and the company earns an interchange on transactions that average 2%. Direct to bank through Visa Direct is the second method that the company provides for a 5% fee. Finally, there is a free option, which is an Automated Clearing House transfer to a bank account.

Dave is not shy of implementing AI into its credit model to identify who qualifies for cash advances and the amount they are eligible to receive. This enables the company to resolve 90% of the tickets without the involvement of any agents, allowing it to offer lower-priced services than its competitors. The company leverages ML rather than the FICO-based model used by traditional banks to analyze historical spending, savings and earnings before making any cash advances. These technological advancements provide DAVE with an upper hand over the traditional stops in terms of efficiency and risk management.

The Case for Spotify

SPOT’s powerplay within the music and audio domain is unmatched. It has both freemium and subscription plans. However, the catch is within the number of features the company unlocks when customers pay recurringly. SPOT’s basic subscription plan is $11.99 per month after a 3-month free listening experience, allowing users to enjoy ad-free music listening, offline playback, and more. Apart from this, the company has differentiated in terms of providing plans for duos and families.

Spotify’s high-quality content inventory boosts monthly active users (MAU), bolstering its top line. The annual Wrapped campaign adds to the MAU and subscriber growth. In the first quarter of 2025, subscribers increased 12% year over year and MAU grew 10%. Per Daniel Ek, Spotify’s founder and CEO, engagement remains high and retention is strong, driven by the freemium model, which provides flexibility to customers, compelling them to avail of SPOT’s services for a long time.

The company’s ability to raise prices while retaining and expanding its customer base is noteworthy. Price hikes have little to no impact on subscriber demand. In this competitive landscape, SPOT stands as a victor on the back of features such as AI DJ and Discover Weekly, providing a bespoke experience to users.

How Do Estimates Compare for SPOT & DAVE?

The Zacks Consensus Estimate for Spotify’s 2025 sales is pegged at $19.7 billion, suggesting 15.9% year-over-year growth. The consensus estimate for earnings is pegged at $10.61, indicating a 78.3% rise from the preceding year’s actual. No estimates for 2025 have moved north in the past 60 days versus five southward revisions.

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for Dave’s 2025 sales is pegged at $421.9 million, implying 21.6% year-over-year growth. The consensus estimate for earnings is pegged at $6.53 per share, indicating 24.6% year-over-year growth.  No estimates for 2025 have moved north in the past 60 days versus two southward revisions.

Image Source: Zacks Investment Research

DAVE Looks Cheaper Than SPOT

Dave is trading at a forward earnings multiple of 23.58X, lower than its 12-month median of 34.71X. Spotify’s forward earnings multiple stands at 49.42X, lower than its median of 52.06X.

Image Source: Zacks Investment Research

Verdict

DAVE and SPOT are impressive app-based platform players. While Dave serves its customers by providing swift cash advances at minimal charges, Spotify dominates the audio streaming domain. Both companies are titans in their own spaces. However, DAVE emerges as a smarter buy due to the potential of its untapped market. The audio streaming market is competitive and mature, while lower-cost alternatives to traditional banking have unexplored potential.

Dave, a fundamentally strong stock, is significantly cheaper than Spotify, making it a more compelling opportunity for growth-focused investors today.

SPOT and DAVE both flaunt a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Dave Inc. (DAVE) : Free Stock Analysis Report

Spotify Technology (SPOT) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research