We recently published a list of 10 Best Cash App Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Shopify Inc. (NYSE:SHOP) stands against other best cash app stocks to buy according to hedge funds.
The mobile payment service Cash App has grown significantly throughout the years, and in 2022 it was valued at $138 billion, up from $40 billion in 2020. Although its earnings increased to $2.95 billion, showing consistent yearly growth since 2018, its revenue decreased to $10.6 billion in 2022 from $12.3 billion in 2021, despite this remarkable valuation. Cash App’s user base grew by 7 million from 2021 to 51 million in 2022, due to its user-friendly interface and array of financial services, which include peer-to-peer payments, Bitcoin investments, and cash card features. The four U.S. states of Texas, California, Florida, and New York together account for 48.75% of Cash App’s user base, with over half of its customers concentrated in these states. As of 2020, there were just 10,000 active Android users in the United Kingdom, and its market share was less than 0.05%. In 2022, the platform handled more than 528 million transactions, demonstrating its increasing use. Cash App is positioned as a major participant in the digital payment ecosystem, particularly in the U.S. market, due to its excellent features and rising profitability.
As per findings by Apptopia, Cash App was the most downloaded payment app between April and May 2020, with a 20.1% increase in U.S. downloads, reaching around 4 million within that time frame. Additionally, usage increased, with roughly 250 million sessions in April—the second-highest number among payment applications. As people looked for alternatives to in-person banking and provided financial support to friends and family, the pandemic caused a shift toward digital transactions, which is what is responsible for this surge.
According to Block, Cash App’s parent company, in a manner that many financial institutions have not been able to, Cash App has expanded access to the financial system and enabled a wide range of consumers to send, spend, save, invest, and comprehend their money more effectively. Its goal is to “redefine the world’s relationship with money by making it more relatable, instantly available, and universally accessible,” which is in line with this. Block believes Cash App can keep improving the economy both today and in the future.
However, Cash App has also faced challenges. Recently, under Jack Dorsey’s leadership, Block agreed to a $175 million settlement with the CFPB, which included a $55 million fine and up to $120 million in reimbursements for Cash App users. Allegations of widespread fraud and insufficient customer service on the platform were addressed in the settlement. The CFPB charged Cash App with facilitating fraud, sending users to banks, and neglecting to look into questionable transactions. Cash App accounted for over half of Block’s 2023 gross profit, with over 56 million accounts. In addition, after 48 state regulators joined together, Block paid an $80 million fine for money laundering violations.
The press release stated:
“While we strongly disagree with the CFPB’s mischaracterizations, we made the decision to settle this matter in the interest of putting it behind us and focusing on what’s best for our customers and our business,”
Methodology
For this article, we reviewed multiple reliable websites and videos that discuss stocks available on Cash App. From there, we formed an initial list of the 20 Best Cash App Stocks To Buy According to Hedge Funds. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 900 hedge funds in Q3 2024 to gauge hedge fund sentiment for stocks.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
An enthusiastic customer completing a purchase and receiving an order confirmation via one of the companies online sales channels.
Shopify Inc. (NYSE:SHOP)
Number of Hedge Fund Holders: 56
One of the Best Cash App Stocks, Shopify Payments is a payment platform run by Shopify Inc. (NYSE:SHOP), a Canadian e-commerce firm. This allows Shopify store owners to accept payments online without using third-party services.
Leading e-commerce company invests 17% to 22% of net revenues on research and development to spur innovation. Insiders own 6–7% of Shopify Inc. (NYSE:SHOP)’s total shares, which is in line with the interests of shareholders. The company has a variety of revenue streams, including robust development in its B2B division.
Shopify Inc. (NYSE:SHOP) exhibits competitive strength and consistent market share growth with a three-year revenue CAGR of 26%. Long-lasting brand loyalty and consumer trust are strengthened by its high retention rates and excellent customer satisfaction indicators, such as a high Net Promoter Score (NPS).
Shopify Inc. (NYSE:SHOP) has progressively recovered despite a stock loss of 80% in 2022, helped by advancements in strategic metrics. Diversification into Shopify Plus and B2B solutions has increased its attach rate while preserving its pricing advantage over rivals like Amazon.
Following five quarters of growth of 20% or more, the company’s gross merchandise value (GMV) increased by 24% in the third quarter of 2024. International growth, an increase in offline sales, and the addition of new merchants were the main drivers of this. This expansion was facilitated by several AI-driven projects.
Cantor Fitzgerald increased the Shopify Inc. (NYSE:SHOP) price target from $110 to $120. The analyst informed investors in a research note that the basic backdrop for Internet stocks is still favorable going into 2025, even in the face of new threats like tariffs, and that the rate of innovation in fields like artificial intelligence, autonomous vehicles, robotics, and quantum computing is quickening. The firm anticipates significant growth and margin increases in 2025 from digital advertisements, e-commerce, and mobility.
RiverPark Large Growth Fund stated the following regarding Shopify Inc. (NYSE:SHOP) in its Q3 2024 investor letter:
“Shopify Inc. (NYSE:SHOP): Shopify was a top contributor in the third quarter following a strong second quarter earnings report that included better than expected revenue growth and substantial margin expansion. Gross merchandise value (the value of all items sold on the platform) growth of 22% was three percentage points above investor estimates, revenue of $2.0 billion was $50 million better and free cash flow of $333 million was $80 million better. A combination of new merchants to the company’s platform, increased adoption of SHOP’s offerings by existing merchants, and e-commerce market share gains are driving this revenue growth and profitability.
Last year, 10% of US retail e-commerce sales flowed through SHOP, second only to Amazon, and the company is still enjoying significant tailwinds as retail merchants of all sizes adopt SHOP’s software tools to display, manage and sell their products across a dozen different sales channels. We believe that the overall growth of e-commerce, combined with the development of new products and services, such as its digital wallet Shop Pay, should continue to drive revenue growth of more than 20% per year over the next several years, accompanied by re-acceleration of operating margin growth and FCF generation.”
Peter Rathjens, Bruce Clarke And John Campbell’s Arrowstreet Capital was the largest stakeholder in the company among the funds in Insider Monkey’s database at the end of Q3 2024. It owns 9.17 million shares worth $734.77 million as of Q3.
Overall, SHOP ranks 10th on our list of best cash app stocks to buy according to hedge funds. While we acknowledge the potential for SHOP to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SHOP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
