“Selling Shovels” to Marijuana Industry By TipRanks

WM Technology, Inc. (MAPS) is a very interesting company within the marijuana industry. Unlike other players in the space, the company doesn’t actually touch any plants. Instead, it provides SaaS subscription offerings to retailers and brands in the United States and Canadian cannabis markets. It also operates the Weedmaps listings marketplace, which provides consumers with information regarding cannabis retailers and brands.

WM Technology is growing fast and earns a profit, which is a rarity within the cannabis industry. In fact, according to management, the company has been profitable since it was founded, back in 2008.

Furthermore, it boasts 95.6% gross margins and it’s cash flow positive. This allows WM Technology to reinvest more as a percentage of revenue into growth, while not having to rely on outside capital. As a result, we are bullish on WM Technology. (See WM Technology stock charts on TipRanks)

Growth Catalysts

WM Technology’s target market is the marijuana industry. The industry is expected to see a substantial CAGR of 13.9% from 2021 to 2026. In 2020, the industry was estimated to be worth USD 22.9 billion. The high growth from the overall industry should act as significant tailwinds for the company.

This growth can be attributed to a few things. To begin with, more states in the U.S. continue to legalize both medicinal and recreational marijuana use. As more states legalize, the total serviceable market will continue to grow. Furthermore, the states that have legalized marijuana are under-served in terms of retail licenses. Thus, most of the market still operates on the illegal side. This provides a large runway for growth as new licenses are issued.

Since WM Technology is neither a dispensary or producer, it has the advantage of not having to compete with the vast number of marijuana companies selling the physical product. WM Technology is the specialized software provider software provider to these marijuana companies.

Given that it was founded in 2008, WM also has a strong first mover advantage. Think of the marijuana industry as the 1849 California Gold Rush, where few prospectors struck it rich. Most of the people who made money back then were those who sold shovels, supplies and services to the prospectors. WM Technology is the equivalent of “selling shovels” to the marijuana industry. The benefit of “selling shovels” is clearly demonstrated on the financial statements.

When looking at the company’s U.S. operations, we can see strong growth in users and per-user spending. In the first quarter of 2020, the company had 3,238 clients paying average monthly revenues of $2,681. In the second quarter of 2021, these figures grew to 4,221 clients paying an average of $3,706 each. Clearly, clients find the services very useful, and they are willing to increase their spending.

Risks

WM Technologies has 18 regulatory risks. At any time, laws could change to…