WM Technology, Inc., or MAPS, is a company that’s very unique in the cannabis sector. The company does not actually handle any cannabis plants, unlike other companies in this space. The company offers SaaS subscriptions for retailers and brands across the United States as well as Canada. The Weedmaps marketplace provides information to consumers about cannabis brands and retailers.

WM Technology has a rapid growth rate and makes a profit. This is a rarity in the cannabis sector. According to the management, the company is profitable ever since its inception, which was back in 2008.

It also boasts a 95.6% gross margin and is cash flow positive. This allows WM Technology, which does not rely on capital outside of the company to reinvest greater percentages of revenues into growth. We are therefore bullish about WM Technology. TipRanks shows stock chart for WM Technology.

Growth catalysts

WM Technology targets the cannabis industry as its target market. From 2021-2026, the industry will experience a 13.9% CAGR. The industry’s value was USD 22.9 billion in 2020. It should benefit from significant growth in the industry.

These are just a few of the reasons for this growth. The first is that more states continue to allow recreational and medicinal marijuana use in the United States. The total market serviceable will grow as more states legalize marijuana. The state that has legalized marijuana is not well-served by retail licenses. The illegal market is still the largest part of the market. As new licenses become available, this creates a lot of potential growth.

WM Technology is not a marijuana producer nor dispensary. It has the benefit of not being in direct competition with many other companies that are selling the actual product. WM Technology provides software providers for these companies and is a specialized software provider.

WM was created in 2008 and has a solid first mover advantage. The marijuana industry can be compared to the 1849 California Gold Rush. Few prospectors made it big. The prospectors were the ones who earned the most money. They bought shovels, tools and supplies. WM Technology acts as a “seller of shovels” for the marijuana industry. Financial statements clearly show the benefits of selling shovels.

We can observe strong increases in per-user spending and users when we look at U.S. operations. The company’s first quarter 2020 saw 3,238 clients, with an average monthly revenue of $2,681. The company had 4,221 clients in its first quarter 2020, with an average monthly revenue of $2,681. In the second quarter, this number grew to $4,706 for each client. Clients find these services extremely useful and are open to increasing their spending.

Risques

WM Technologies faces 18 regulatory threats. Retailers could be affected by changes in laws that reverse industry progress. WM Technologies, which would also suffer from such a scenario would see its customers leave.

Additionally, there are some problematic marijuana retailers who don’t operate within full compliance. WM Technologies was already faced with this problem and had to cease providing services for companies that failed to supply valid license information. This resulted in the loss of all revenue streams from Canada. However, revenue from Canada was lost because of the U.S. growth.

Wall Street Take

WM Technologies’ consensus rating is Strong Buy, based the six Buys that were assigned over the past three month. The $18.75 average target price for WM Technologies implies a 26.6% upside possibility.

Last Thoughts

WM Technologies offers a unique opportunity to sell “stols” in the rapidly-growing cannabis industry. It is refreshing to see a company which has been profitable consistently since its inception, considering how unprofitable and volatile most companies have been in this sector. We believe that the overall growth trends, catalysts and risks of the company outweigh them.

Disclosure: Stock Bros Research owned a large position in WM Technologies as of the publication.

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