WM Technology’s MAPS sales declined by 4.5% year-over-year and quarter-over-quarter in Q1 2024.
Average monthly paying clients decreased by 1.5% sequentially to 4,937, while average monthly revenue per client fell 1.5% to $2,997. Nevertheless, in his latest report, senior analyst Pablo Zuanic from Zuanic & Associates finds a bull case for the cannabis tech stock.
Q1 2024: Highlights
- EBITDA margins remained above 20%, reaching 21.6% in Q1 2024 due to reduced sales and marketing expenses and improved cost efficiencies.
- California accounted for approximately 55% of sales, with Colorado, Michigan and Oklahoma contributing about 30%.
- The company generated $10 million in EBITDA for Q1 2024, compared to -$9 million for all of 2022. As of March 2024, MAPS held $36 million in cash, with no financial debt, resulting in a $1.3 million quarter-over-quarter increase in cash.
- The reduction in receivables, from $11.1 million to $7.9 million, contributed to this positive cash flow. Free cash flow for Q1 2024 was $2.9 million, and the company generated $11 million in free cash flow for the entire year of 2023.
Outlook
According to Zuanic, MAPS management did not provide FY 2024 guidance but expects stable sales for Q2 2024 and anticipates EBITDA of around $7 million, down from $9 to $11 million due to increased marketing spend. Meanwhile, the recent legalization of recreational cannabis in Ohio is expected to drive growth in the second half of 2024.
Valuation And Market Performance
Zuanic notes in his report that WM Technology is trading at 1.3 times CY 2024 sales and 8 times EBITDA.
In contrast, vertical SaaS stocks are valued at 6.7 times sales and 19 times EBITDA, marketplace stocks at 2.5 times sales and 10 times EBITDA, and e-commerce enablement stocks at 3.7 times sales and 26 times EBITDA. Zuanic noted that with a market capitalization of $156 million and an enterprise value of $243 million, MAPS appears undervalued compared to its technology sector peers.
Stock Performance
Over the last three months, NASDAQ increased by 2%, while MAPS declined by 14%. However, in the past 30 days, MAPS rose by 8%, compared to a 6% decline for NASDAQ.
Despite its current valuation and potential for growth, lackluster sales trends and limited penetration outside its core states keep the rating unchanged. Zuanic rates MAPS as Neutral. If MAPS aligns its growth with the cannabis industry’s expected 50% expansion over the next three years, the stock could see significant upside.
Read Also: European Cannabis Companies Race To The Nasdaq: $1B In Tax Break On The Horizon
The Bull Case
Zuanic noted that, from a technical perspective, the stock could move up if cannabis stocks surge on rescheduling news, as it is more correlated to the MSOS ETF than NASDAQ.
“If tech stocks re-rate, the stock may benefit since EV/Sales for comparable tech stocks have dropped from the low teens three years ago to 4-5x now. Fundamentally, acceleration in the US cannabis market growth should all bode well for MAPS. The company also has room to increase penetration in several states,” Zuanic wrote. “If company sales reach $500 million by 2026, at 4x EV/Sales, the stock could be worth $13 by Dec’25, compared to $0.81 now.”
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