WM Technology (MAPS) Sales Decline in Q1 2024, But Analyst Sees Bull Case for Cannabis Tech Stock
Despite a 4.5% year-over-year and quarter-over-quarter decline in sales for WM Technology (MAPS) in Q1 2024, senior analyst Pablo Zuanic from Zuanic & Associates remains bullish on the cannabis tech stock. While the company experienced a slight dip in average monthly paying clients and revenue per client, Zuanic highlights several factors that could propel MAPS to significant growth in the future.
Key Takeaways:
- Declining Sales: Q1 2024 saw a 4.5% decrease in sales for WM Technology (MAPS), with average monthly paying clients down 1.5% sequentially to 4,937 and average monthly revenue per client falling by 1.5% to $2,997.
- EBITDA Remains Strong: Despite the sales decline, EBITDA margins remained above 20%, reaching 21.6% in Q1 2024 due to reduced sales and marketing expenses and improved cost efficiencies.
- California Dominates: California accounted for approximately 55% of sales, while Colorado, Michigan, and Oklahoma contributed about 30%.
- Cash Flow and Valuation: MAPS generated $10 million in EBITDA for Q1 2024, compared to -$9 million for all of 2022. The company holds $36 million in cash, with no financial debt, and generated $11 million in free cash flow for the entire year of 2023. Zuanic notes that MAPS is currently trading at 1.3 times CY 2024 sales and 8 times EBITDA, suggesting an undervaluation compared to its technology sector peers.
- Growth Potential: The legalization of recreational cannabis in Ohio is expected to drive growth in the second half of 2024. Zuanic believes that if MAPS aligns its growth with the cannabis industry’s expected 50% expansion over the next three years, the stock could see significant upside.
- Bull Case: Zuanic highlights that MAPS could benefit from a potential surge in cannabis stocks due to rescheduling news. He projects that if sales reach $500 million by 2026, the stock could be worth $13 by December 2025.
Declining Sales: A Closer Look
The decrease in sales can be attributed to several factors, including a moderately saturated market in some key states like California and the company’s strategic focus on profitability over short-term revenue growth. The decline in average monthly revenue per client could be linked to increased competition in the cannabis technology space or a shift in the types of clients served by MAPS. However, the company’s continued investment in its platform and expansion into new states suggests a long-term commitment to growth.
EBITDA Margin Strength
The consistent EBITDA margins are a positive sign for MAPS, indicating that the company is effectively managing its expenses. This is achieved through a combination of cost efficiencies and a renewed focus on profitability. The reduction in sales and marketing expenses has directly contributed to this improvement, demonstrating a streamlined strategy.
Expansion and Opportunity:
The legalization of recreational cannabis in Ohio opens up a significant opportunity for WM Technology (MAPS). The state’s rapidly expanding cannabis market provides a new avenue for growth and an opportunity to capitalize on the increasing demand for cannabis products and services. As MAPS expands its footprint into new markets, it can leverage its established technology platform and brand recognition to secure a strong market position.
Valuation and Comparison:
While the current valuation of MAPS may seem unremarkable, Zuanic argues that the company is undervalued compared to its technology sector peers. This undervaluation creates a potential opportunity for investors seeking exposure to the growing cannabis technology space. As the cannabis industry continues to mature and legalization efforts progress, MAPS could see its valuation align more closely with its peers.
The Future of WM Technology (MAPS)
The future of WM Technology (MAPS) hinges on its ability to navigate the evolving cannabis landscape while maintaining profitability. The company’s strategic expansion into new markets, focus on EBITDA margins, and potential for growth in the US cannabis market all contribute to a bullish outlook.
While the near-term sales trajectory remains uncertain, the long-term potential for MAPS is significant. As the cannabis industry continues to grow and mature, WM Technology (MAPS) has the opportunity to become a dominant force in the cannabis technology space. Continued investment in its platform and strategic expansion into new markets hold the key to unlocking the company’s full potential.
