What happened

Week to date, shares of Dave (DAVE 15.60%) were trading down 17.9% at 10:50 a.m. ET on Friday, according to data provided by S&P Global Market Intelligence.

On Thursday, the company reported that non-GAAP (adjusted) revenue had grown 22% year over year in the second quarter. 

So what

Dave provides a banking app that helps the underbanked gain access to traditional financial services, such as bill management and credit. Dave added over half a million new members in the quarter, bringing its monthly transacting members to 1.54 million. 

What might have weighed on the stock price following the investor update is lower profit margin. Dave reported an adjusted variable profit margin of 39%, compared to 55% in the year-ago quarter. The company has been ramping up advertising and marketing spend to acquire new users, which is weighing on profitability. Advertising spend nearly doubled year over year, which cut into the company's margin.

Now what

Management's guidance calls for adjusted operating revenue to be between $200 million and $215 million for 2022, compared to $153 million in 2021. This should translate to an adjusted profit margin between 40% to 44% for the full year. 

Some investors might be tempted to buy this small-cap stock now that it's 95% from its all-time high. Services for the underbanked is a promising area if you're looking for undiscovered growth stocks. It's estimated that by next year, 65 million Americans will be underbanked or not have access to banking at all. Another 185 million will fall into the low-income and credit-challenged category, according to the Financial Health Network. 

While this serves as a massive growth opportunity for Dave, the market is highly competitive, with large, well-financed players like PayPal and Block vying for position with more recognizable brands and sophisticated apps of their own.