WM Technology (NASDAQ:MAPS) is down 28.3% so far in 2023 and is down 90.7% year to date. I believe it may rally significantly, so this reduced price makes it much more appealing to investors.

MAPS operates two businesses: Weedmaps, a well-known B2C enterprise, and a B2B business. More information about the company can be found in their investor presentation, which indicates that the B2B business represented approximately 24% of 2022 revenue and grew slightly faster than the overall business during the year.

In this article, I will go through the company’s previous year, the outlook, the chart, and the valuation.

2022 

2022 was a difficult year for the company and the industry. MAPS is now being operated on an interim basis by the Executive Chairman. The previous CEO left in early November. Doug Francis, the temporary CEO, is a co-founder of the company and can run it indefinitely, but I am hopeful that the company can attract a new CEO who will appeal to investors as a suitable choice.

Revenue increased 11.6% year on year to $215.1 million, which was significantly below planned. The number of average monthly paying clients increased by 26% to 5457, but the average monthly income per paying client decreased by 11% to $3291, suggesting industry problems and a heavy concentration in California.

Worse for the stock than slower-than-expected revenue growth was the erosion of profitability. The adjusted EBITDA dropped from $31.7 million to -$9.6 million. The company recorded a loss of $1.36 per share. MAPS made $30.2 million in revenue in 2021, but it spent $11.6 million in 2022.

Outlook

MAPS will report its first-quarter earnings on May 9th. Analysts forecast that revenue will fall 7% to $200 million in 2022. The company’s adjusted EBITDA is estimated to be $18 million.

Sales are predicted to increase by 7% to $214 million in 2024. Adjusted EBITDA is expected to increase by 29% to $24 million.

MAPS has been pounded by investors. The stock began as a SPAC and went public at a price of $10. After the Q3 earnings report in November 2021, it gapped down.

MAPS stock has declined significantly in the last year.

The stock just hit an all-time low, but it has since recovered somewhat. Nonetheless, it is down 28.2% in 2023. I feel $0.65 might give support, with the first resistance at $0.85, which would still be down year to date. There are two open spaces above pertaining to last year’s Q3 and Q2 earnings reports. I expect the first gap will be filled this year, with the price more than doubling. My aim for the stock is just below the second gap, but it might go further lower.

Valuation 

It’s tough to determine the “right” amount of valuation for this company because revenue has been dropping and EPS has been negative and is expected to continue negative for some time. I calculate the current enterprise value to be $135.4 million utilizing $28.6 million in cash at the end of the year. This comes out to a relatively modest 7.5X when compared to the estimated adjusted EBITDA for 2023. It’s even lower in 2024, at 5.6X. These are, in my opinion, very low valuations for a company that is solely focused on cannabis operators. The enterprise value to predicted sales in 2023 is only 0.7X.

My year-end goal is to achieve 30X adjusted EBITDA anticipated for 2024, which has recently remained consistent. This equates to $3.26 per share assuming $20 million in cash to modify the enterprise value. This would be more than four times the present price and 3.4 times the predicted revenue. Even if it only reached 2X the expected revenue, the stock would trade significantly higher than it does now.

Conclusion

MAPS is an excellent company in my opinion, but it has been a terrible investment in a bad sector. I feel it can rally for technical reasons, and my target is significantly higher than the present price.

Featured Image: Unsplash @ crystalweed

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