Cash-Rich Stocks to Buy: Shopify (SHOP)
Cash-to-Market Cap: 5.3%
Shopify Inc (US) (NYSE:SHOP) provides the technology necessary for small- and medium-sized businesses to operate e-commerce websites, including the collection of payments. It finished Q1 2017 with $395.7 million in cash and no long-term debt.
If you’re worried about Shopify losing money, don’t be. Its business model is all about making a little from of a large number of customers. Those customers pay Shopify a monthly subscription fee to use its e-commerce platform and to process transactions.
Simply put, Shopify brings in recurring revenue each month from customers who use its technology. As those customers grow their sales, Shopify’s top line swells because of the cut it takes. To make it worthwhile, Shopify has to scale the business, and that means spending a lot of money to market the business and capture new leads.
I recently called SHOP one of the best growth stocks to buy, thanks in part because it’s growing revenues at almost triple digits every quarter. However, it’s also a cash machine, expanding its cash flow by 510.5% to $4 million last quarter. Moreover, the company just announced it would sell 5.5 million shares to raise another $490 million to keep funding growth.
Unless something drastically bad happens in the next few quarters, Shopify is in a stellar position.