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WM Technology: Extremely Cheap And Still Years Of Growth Ahead

Jan. 05, 2022 5:22 AM ETWM Technology, Inc. (MAPS)14 Comments
Manuel Paul Dipold profile picture
Manuel Paul Dipold


  • Since the IPO, the company has had to solve some problems and the market has not responded well.
  • WM Technology is an opportunity to bet on the growth of the cannabis market without betting on individual MSOs.
  • In the last 6 months, the stock has lost 66% of its value, which makes the valuation on next year's sales look extremely cheap.
  • The company published a report in November 2021 with interesting insights about the cannabis market in America.

Museum Dedicated To Marijuana Opens In Los Angeles

Mario Tama/Getty Images News

Investment Thesis

WM Technology (NASDAQ:MAPS), the company behind Weedmaps, has been dominated by negative headlines in recent months, resulting in very negative momentum that continues to this day. I would like to explain why this is an overall

This article was written by

Manuel Paul Dipold profile picture
My focus is on a total return style with long and short positions (10-30% short positions). My main expertise is the current technological and geopolitical shift with the amazing investment opportunities they offer. Therefore, I always try to find stocks or whole sectors with favorable risk-reward structures. My long investment style is a core-satellite strategy: The core consists of large caps and/or ETFs. The satellites around this core are small caps, potential 10-baggers, and undervalued stocks. In short selling, I focus on overvalued stocks that will fall back down sooner or later. My name is Manuel Paul Dipold. Born in Germany but lived 8 years in Asia. I am myself an entrepreneur and have many entrepreneur friends. I am not a professional investor but it´s a hobby I love. So I know Europe and Asia very well and seek undervalued or high-growth stocks - always with valuation, geopolitical and social shifts in mind.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (14)

The following is not an opinion on use of cannabis itself: For me it is shocking, that illegal businesses as in US as in Canada were even willing let alone able to advertise themselves publicly. One would expect that police and other forms of law enforcment would readily pick them up, especially how transparent they were - easilly to be found and proved of doing an illegal businesses. How is it even possible that it went on for so long? Again, this is not an opinion on use of cannabis itself, just perspective on enforcment of laws and regulations.
The most recent earnings report cites YTD basic EPS at $0.39 and diluted EPS at $-0.15. Can someone help me understand how share dilution can turn a profit into a loss? What am I missing?
Maschuette profile picture
@caden.copeland1 i had to google it because i didnt know either: dilutive eps includes employee stock options while basic does not. New companies give a bunch of stock awards as a percentage to the executives and higher ups.
Trade In Mexico profile picture
Great article, thank you Manuel! I just started following you.
Manuel Paul Dipold profile picture
@Trade In Mexico Thanks :) Glad you liked it
AnalyticsInvesting profile picture
Be very careful on this sentence, as Google can change that any second they want. "So the goal is that consumers don't search for dispensaries on Google, but directly in their Weedmaps app (although even in Google search, Weedmaps almost always shows up on the first page). So these dispensaries are paying to show up in the app in the first place." Plus, read our write up here on their big problem and why they fought so hard to keep illegal listings on the site. cannabis.net/...
Doctor Dividend profile picture
Note: I did have a few shares so I could follow the company, but sold them for tax harvesting prior to 12/31.

The first 2 comments are correct. When one uses the full dilution that will come from warrants and stock options as well, you have an almost billion dollar market cap, not the $400 million that's mentioned in the article. When you include that, that changes the price target dramatically.

I don't think Google is a major threat currently because of the illegal nature of weed on a federal level. I think they would much rather not grab the revenue from advertising for that just so the DOJ has another reason to look into them further. I could be off base.

The $3800 a month may include some advertising, but is a business in a box that tracks the certain strain from harvest to the point of sale. WM never touches the item - they just help keep track of the item. One thing that wasn't mentioned is the take rate of using the platform. They have mentioned in the past that until Weed is legal on a federal level, there is no percentage of sales through their platform. That is another revenue driver that I like about the company.

the last sticking point is that the larger MSOs will most likely have their own in house technology solution. If the Wild West starts to consolidate, like any industry eventually does, is that going to push WM to the side and when? That may be the greatest risk.

Having said that, I like the pick and shovels recurring revenue aspect of the company as I don't know which public dispensary is going to win. But the eventual dilution one has to account for plus the legalities around the space currently, the risk IMO comes off the table if/when the stock goes below $5 a share. Some long dated options become very intriguing at that point as you hope 2 years clears a lot of uncertainty.
Manuel Paul Dipold profile picture
@Doctor Dividend Thank you very much for your comment. I think right now any MSO is way too small to create such a platform. I mean Weedmaps users expect a dispensary to show up almost everywhere they are. Right now there would be way too many gaps in MSO´s apps. But if they are big enough to do that in a few years, Weedmaps will already have 20-30 million regular users. It's a threat in the future, but it's far from visible at the moment
Maschuette profile picture
Thanks for the article. I am very mixed on this company but you provide a good bull case. My big two concerns are:

1) Google - as you mentioned. I hate that their business model competes with Google and that their cost to their clients is $3,800/mo. I don't know how much it would cost to advertise effectively on Google though. I also don't like the idea of using the app for finding dispensaries. Most people (as your article said) have a favorite brand. They also have a favorite shop. Most of their business is repeat business. Paying $3,800 a month for growth is going to be the first thing cut when they stop growing and plateau as all local shops probably do.

2) Equity dilution. Their last earnings report said they do not plan on diluting shares over the next year and plan on using their cash pile and cash flow to cover any additional acquisitions. They did say that they weren't sure they would be able to refrain from raising money in some form. Their current cash and earnings are not enough to cover the acquisitions they did in 2021 so i am concerned they will raise money with a dilution. It really depends on what they want to buy and how much it cost.

I do plan on going long on this stock but only if it drops further. I have had several SPACs that dropped into the $2 - $4 range and am not going to start a position until we get lower.
Manuel Paul Dipold profile picture
@Maschuette Thanks for your feedback and additions.
I think you're right that using the app daily doesn't make as much sense for people who shop at the same dispensary over and over again. Somewhere on their website I also read that they try to compensate for this with special offers. I would love to read customer experiences, if anyone is a customer let us know ;)
While they do compete with google, it correlates rather poorly. Either someone uses the Weedmaps app, or searches via Google, but probably not both.
Whether dispensaries so quickly eliminate these costs I'm not sure. It depends on what exactly they are getting and to what extent that is measurable. Here in the comments, someone has also written how he spoke with a dispensary operator who considers weedmaps very important in the ecosystem.
05 Jan. 2022
Yahoo Finance is way off on market cap. Diluted shares outstanding is about 162.5mm
Manuel Paul Dipold profile picture
@YaoM Thanks! yeah that´s important
Thanks for this write-up! This stock has been moving like a true rollercoaster pre-merger and post.

Recently spoke with a dispensary owner in South California. He acknowledged recent challenges for legal dispensaries (hard to compete with the illegal ones) and challenges around working capital and taxation as the overall industry isn't legalized. In short: it's a really tough business to be in. But he his view was also that WM plays an important role in the eco-system, and dispensaries may spend 2-5% of their revenues on the platform indefinitely. ("WeedMaps will definitely keep playing an important role in the eco-system").

Also, on dropping the Canada business and the impact on growth rates: while this is very obvious I do feel it is missed by many investors... Q4 will LOOK a lot different even though actual growth will be in line with Q3. Expecting pop after earnings. But who knows...
Manuel Paul Dipold profile picture
@harmjano2 Thanks for that. Real experiences are a very useful addition! That´s why I love Seeking Alpha´s comment section.
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