WM Technology - Bull/Bear Scenario Analysis & Investment Thesis
Updated: May 5
This page presents the WM Technology (Weedmaps) investment thesis with bull and bear scenario analysis of future revenue, market cap and share price. The page uses the format and thoughts presented in the Cannabis Portfolio page, with following sections:
Overview and investment thesis
The following is the official description on the WM Technology Investor Relations website:
Founded in 2008, WM Technology, Inc. (“WM Technology,” “Weedmaps,” or “MAPS”) is a leading technology and software infrastructure provider to the cannabis industry. WM Technology’s mission is to power a transparent and inclusive global cannabis economy. Now in its second decade, WM Technology has been a driving force behind much of the legislative change we’ve seen in the past 10 years.
WM Technology comprises B2C platform Weedmaps, and B2B software WM Business. The cloud-based SaaS solutions from WM Business provide an end-to-end operating system for cannabis retailers. WM Business’ tools support compliance with the complex, disparate, and constantly evolving regulations applicable to the cannabis industry. Through its website and mobile apps, WM Technology provides consumers with the latest information about cannabis retailers, brands, and products, facilitating product discovery and driving engagement with our retail and brand customers.
WM Technology holds a strong belief in the power of cannabis and the importance of enabling safe, legal access to consumers worldwide. Since inception, WM Technology has worked tirelessly, not only to become the most comprehensive platform for consumers, but to build the software solutions that power businesses compliantly in the space, to advocate for legalization, social equity, and licensing in many jurisdictions, and to facilitate further learning through partnering with subject matter experts on providing detailed, accurate information about the plant.
An important step as you DYODD in any company is to review the company’s Investor Presentation and financial results. For WM Technology, these are available in their Events and Presentations page and their Financial Information page.
I would highly recommend downloading the latest Investor Presentation and studying it. There is a lot of information but it will give you an overview of their strategy, brands, performance and investment thesis. I will not repeat the content, but will mention some key points and insights.
WM Technology has been categorized in my fruits analogy as an apple, because it is a technology company in the cannabis industry. It has been categorized as a senator in the Senate (Nasdaq). The company is a rare publicly listed Technology company in the cannabis sector, along with competitor Leafly Holdings (Nasdaq: LFLY).
WM Technology is best known for the App and platform, Weedmaps.com. An important step in the due diligence process would be to visit the website and download the App, available on Android and iOS.
As a leading cannabis technology platform providing integrated solutions for cannabis consumers and businesses, Weedmaps features prominently in Google searches, especially related to finding cannabis dispensaries. Dispensaries pay Weedmaps to be listed. Customers can find dispensaries, and search by brands, products, strains, deals, etc. Customers can also order on the Weedmaps platform/App where deliveries are available.
WM Technology is one of the highest ranked companies in terms of ETF ownership as analyzed in the MJ ETF Analysis. It is a top holding in the ETF and also one of the stocks that has seen an increase in number of shares held by the ETF through 2022. This, in an environment in which cannabis ETFs have seen funds flowing out and a decrease in Assets Under Management (AUM) is a factor to be noted. The stock is also owned by the AdvisorShares Pure Cannabis ETF (Ticker YOLO) as analyzed in the Cannabis ETF Analysis page. The sizeable ownership by these two large cannabis ETFs will be beneficial to the share price when the cannabis sector gets back in favor and funds flow into cannabis stocks and ETFs (i.e. sector rotation).
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Bull and bear scenario analysis using 5% quarter over quarter (QoQ) revenue growth and 10% annual share dilution
The base case scenarios for WM Technology are built on the assumption that quarter over quarter (QoQ) revenue growth will be 5% and annual dilution of shares will be 10%. The table below shows the quarterly revenues for the decade starting Q1 2020, and future revenues forecasted with 5% sequential revenue growth.
All tables on this page will be updated frequently. Review the past performance in revenue growth, the average for past quarters and the Decade to Date (DTD) % Growth in revenue. These were incorporated in the Best Cannabis Stocks Analysis. The table with comparisons to other analyzed cannabis stocks is presented in the Revenue Growth Analysis page. The table shows a strong (nearly 10%) average quarterly growth in revenue.
terms of Revenue Growth Analysis. It is one of the select few companies to be awarded the full 15 points for Revenue Growth in the Best Cannabis Stocks Analysis, having delivered an average quarterly revenue growth in excess of 15% for the decade that started in Q1 2020. During this decade the company has also delivered positive AEBITDA in every quarter. It was hence awarded the full 15 points for the AEBITDA category in the Best Cannabis Stocks Analysis.
This now leads to what I call the Adastra charts for the base case Bull and Bear scenarios. The Bull Market Scenarios are presented in the table below.
All the scenario analyses presented here are built on the thesis that the rising tide of cannabis will be not one but two waves – the revenue growth wave and the bull market valuation wave. These tables predict the potential market cap and share price for the combined effect of these two waves, which can magnify the potential gains in share price appreciation.
This Bull market scenario analysis factors in 5% quarter over quarter (QoQ) revenue growth and 10% annual share dilution. Based on previous performance and the execution of the strategy demonstrated, I’d assess that there is a good probability that the revenue growth is achievable.
Nobody can predict when the next bull market will happen. But the numbers are modelled out to 2025, and if we see bull market valuations in these years, the market cap and price targets will be driven by the PS valuations given by the market. The numbers show that if we see any of the Bull Market PS valuations (Moon 10 PS, Mars 15 PS, Stars 20 PS), impressive gains can be had.
Will this company survive (with limited share dilution) till the next cannabis bull market?
With the base case scenario (5% quarterly growth at 10% annual share dilution) achievable, there is a good probability that WM Technology will survive till the next bull market. The probability of survival increases when we see the numbers in the AEBITDA Analysis. The numbers show that in spite of the phenomenal growth achieved, the company has reported positive AEBITDA in almost all of the quarters this decade. This is a well run company that combines revenue growth with cost optimization.
In the INVESTING category’s Cannabis Investing 1: Investment Opportunity of the Century? article, I estimate that the US cannabis market will grow from current US$30 billion to US$50 billion or more in 2025. Given the growth prospects for the cannabis market, the revenues forecasted in the tables above can be achieved if WM Technology continues to grow with the cannabis market. The revenue projections seem conservative and achievable through a combination of organic growth and growth through acquisitions. Should there be a bull market in the future years, with bull market valuations, the market price and share prices projected are achievable.
While the long term prospects for the cannabis sector are bright, in the short term there is a risk that the sector will remain out of favor and that valuations can remain low or even deteriorate further. It is important to model out Bear market scenarios based on Bear Market PS valuations (Koala Bear 2 PS, Panda Bear 1 PS, Polar Bear 0.5 PS). These Bear Market Scenarios are presented in the table below.
WM Technology’s low PS Ratio for a Technology company, given strong revenue growth and AEBITDA results indicate that there may be limited downside potential to the share price. The only justification for lower PS valuation would be a risk of bankruptcy. I never assign 100% probability to any scenario in the cannabis sector. But based on all that I know about the company, I would assess the bankruptcy risk as low.
Nevertheless, the Bear Market scenarios are worth reviewing to project market cap and share price for lower PS valuations.
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Optimistic bull and bear scenario analysis using 10% quarter over quarter (QoQ) revenue growth and 20% annual share dilution
Now let’s look at some optimistic scenarios and assess feasibility for these scenarios. The optimistic case scenarios for WM Technology are built on the assumption that quarter over quarter (QoQ) revenue growth will be 10% and annual dilution of shares will be 20%. The table below shows the quarterly revenues for the decade starting Q1 2020, and future revenues forecasted with 10% sequential revenue growth.
Review once again the past performance in revenue growth, the average for past quarters and the Decade to Date (DTD) % Growth in revenue.
This now leads to the Adastra charts for the optimistic case Bull and Bear scenarios. The Bull Market Scenarios are presented in the table below.
At first glance, the revenue growth numbers seem too good to be true. The 2025 revenue projection in the optimistic scenario (10% quarterly revenue growth) is nearly US$ 1 Billion. The company has delivered an average quarter over quarter growth of nearly 10% for this decade. But that was during the early phases of the growth in the cannabis market. To deliver the sequential quarterly revenue growth of 10%, the company would need to grow with the US cannabis market and also leverage their ecosystem for additional revenue streams.
As a Technology company, WM Technology already has a robust ecosystem and platform with Weedmaps. This can be scaled up as more states and countries legalize cannabis, for either medical or recreational purposes. A 10% sequential quarterly revenue growth is achievable if the company expands into new markets.
This brings us to the question:
Will this company thrive when legislation allows uplisting, institutional ownership and Nasdaq/NYSE listed companies to sell THC products in the US?
WM Technology is already listed on Nasdaq (Ticker: MAPS). If legislation is passed that allows OTC listed US Cannabis companies to uplist to Nasdaq/NYSE, Nasdaq listed companies will have more opportunities with products and services as restrictions ease. WM Technology has a large customer base and can potentially leverage that, along with its data assets, to grow revenues.
In the INVESTING category’s Cannabis Investing 5: When Moon, Mars and Stars? article, I elaborate on the potential impacts of institutional investors finally getting to invest in fundamentally strong US Cannabis companies, who are trading at ridiculously low valuations on the dog-eat-dog OTC exchange (Colosseum). The real and sustainable gains in market cap and share price for cannabis companies might only be achieved when the institutions invest their funds in the sector and bring in sector rotation. This can trigger a bull market and with it the bull market valuations shown in the table above. The optimistic case, however far fetched the numbers may seem, is mathematically feasible with institutional participation and more funds flowing into the sector.
In the optimistic scenario also, in the short term there is a risk that the sector will remain out of favor and that valuations can remain low or even deteriorate further. It is important to model out Bear market scenarios based on Bear Market PS valuations (Koala Bear 2 PS, Panda Bear 1 PS, Polar Bear 0.5 PS). These Bear Market Scenarios are presented in the table below.
In this section I will share some additional thoughts of mine, designed to provoke further thought and due diligence in readers.
The main differentiating factor for WM Technology is that it is a technology company operating in the Cannabis sector. The company already has a robust ecosystem and platform with Weedmaps that can be scaled up as more states and countries legalize cannabis. While US legalization is a topic much discussed in mainstream and social media, Europe also has tremendous potential.
Germany in particular is a market to watch, for both with Medical and Recreational cannabis. The market size is potentially more than double Canada's with Germany having more than double Canada's population, and one of the highest GDP and per capita incomes in the world. The growth potential for a company like WM Technology are high in the scenario of Germany legalizing, as they leverage and scale up the Weedmaps platform. In this scenario, the revenues forecasted in the Optimistic scenarios seem achievable.
The other thing I like about the Weedmaps platform is the wealth of content. A section well worth reviewing is the Learn section, with educational articles on CBD (Cannabidiol), Cannabis and your Body, History and a variety of cannabis related topics. They also have a News section with news articles. This content, along with the Weedmaps platform with dispensaries, brands, products, etc brings high traffic and users to the platform, which will only grow with further legalization across states and countries.
But the factors I am most bullish about with WM Technology relate to being a technology company and a senator in the Senate (Nasdaq). In my article Cannabis Investing 5: When Moon, Mars and Stars?, I share a scenario I deem probable. Depending on the timing of implementation of uplisting and institutions joining the party, we might see a scenario where the bull market will favor the Nasdaq listed senators first, while the OTC listed gladiators miss out. Such a scenario would see senators like WM Technology, Tilray and High Tide rise to disproportionately higher valuations, at which point they can raise large amount of funds through equity offerings. These funds could be used to buy out OTC listed gladiators at low valuations (using creative techniques to do so legally).
It is impossible to predict the future. But the numbers and narratives presented in the Cannabis Investing 4: Gladiators, Senators, the Colosseum and the Senate article and the Historic Bull Market Valuations analysis show the outperformance of Nasdaq listed stocks. Based on the data I would predict that WM Technology and Tilray will be the first two stocks to get valued at Moon (PS 10), Mars (PS 15) and potentially Stars (PS 20) valuations.
The fundamentals for WM Technology are impressive, backed by quarterly revenue growth and strong AEBITDA results. In addition, being a top holding of the ETFMG MJ and AdvisorShares YOLO ETFs will be beneficial when funds flow back into the cannabis sector. Overall, the company offers a compelling investment thesis and is well worth due diligence and inclusion in any cannabis portfolio.
Information sources and charts
As mentioned, the Investor Presentation and Financial results are a must read for any current or new investor.
You can also stay informed by following the company and senior management on Twitter and joining the conversation with fellow investors on Stocktwits and other platforms. WM Technology is active on Twitter @weedmaps and has a large following. The CEO, Chris Beals is also active on Twitter and can be followed @chrisbeals.
WM Technology has an active investor community on the Stocktwits WM Technology page.
The following are charts from TradingView that can be clicked on for more detailed charts and data.
This page, along with the analysis and tables included will be updated on a regular basis. If you are a WM Technology shareholder who wants to stay stay informed with the latest bull/bear scenario analysis, feel free to add this page to your browser favorites.
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Disclosure: I (username Adastra) am an investor not a trader. I am bullish on the Cannabis sector as a long-term investment (2025 and beyond), provided stocks/ETFs are carefully picked based on data-driven due diligence. Of the 15 stocks covered in the Best Cannabis Stocks analysis, I own only High Tide, which I am holding as a long-term investment. But my analysis indicates (without any guarantees) that there is a potential for impressive gains in investing in the stocks best ranked in the analysis, including WM Technology, Trulieve, Curaleaf and any other stocks that will have a dedicated page. I reserve the right to buy or sell at any time any of the stocks mentioned in this blog. I do not short stocks and never will short any stock in a company that makes the world a better place. I do not have insider knowledge of any company covered in this blog. All data used for analysis is from public sources. I have received (as of last update date of this page) ZERO funding for this blog from any of the companies featured in this blog.