US Markets And AI Tools Will Redefine Cannabis Landscape

Key Takeaways

• Expansion in emerging markets and adjacent verticals is driving platform dominance and diversifying revenue sources amid evolving legalization and regulation.
  
• Investment in AI-driven data products, digital advertising, and operational efficiencies is improving margins, profitability, and positioning as a central industry platform.
  
• Regulatory pressures, market consolidation, and shrinking dispensary budgets threaten WM Technology's revenue growth, margin stability, and efforts to diversify beyond its core cannabis sector.

Catalysts

An online cannabis marketplace, provides ecommerce and compliance software solutions to retailers and brands in cannabis market in the United States and internationally.

• Accelerated onboarding of new clients in emerging markets like New York and Ohio is increasing total marketplace clients and establishing early platform dominance as legalization expands; over time, this growing client base can drive higher transaction volumes and recurring revenue. (Impacts: revenue growth, recurring revenue stability)
  
• Ongoing investment in AI/ML-powered data products and proprietary tools to standardize product catalogs positions the company to capture increased demand for personalized, data-driven solutions, unlocking opportunities for premium offerings and higher-margin SaaS revenue. (Impacts: gross margins, ARPU, earnings)
  
• Expansion into adjacent verticals-including imminent launches like the "Hedi" online headshop and future hemp-focused offerings (pending regulatory clarity)-will broaden WM Technology's total addressable market and unlock new, diversified revenue streams. (Impacts: top-line growth, revenue diversification)
  
• The ongoing shift of cannabis retail and consumer engagement toward digital platforms continues to favor leading marketplaces and ad solutions, supporting increased digital ad spend and reinforcing WM Technology's centrality to retailer and brand marketing strategies. (Impacts: ad revenue, ARPU, operating leverage)
  
• Disciplined cost controls, team restructuring, and operational efficiencies have delivered consecutive quarters of profitability and cash generation amid industry turbulence, providing flexibility for continued investment as broader market conditions stabilize and digital adoption accelerates. (Impacts: net margins, cash flow, profitability trajectory)

WM Technology Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming WM Technology's revenue will grow by 5.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.8% today to 17.8% in 3 years time.
• Analysts expect earnings to reach $37.8 million (and earnings per share of $0.2) by about August 2028, up from $8.8 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.5x on those 2028 earnings, up from 15.3x today. This future PE is lower than the current PE for the US Software industry at 36.5x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.84%, as per the Simply Wall St company report.

WM Technology Future Earnings Per Share Growth

Risks

• Intensifying regulatory and tax pressures in key markets like California, such as increased excise taxes and potential regulation of online cannabis marketplaces, are increasing WM Technology's risk and cost of doing business, which could further limit client marketing budgets and directly suppress revenue and net margins.
  
• Continued price compression, consolidation, overregulation, and lack of enforcement against illicit markets in mature states are tightening margins and cash flows for dispensaries and brands, reducing their discretionary spend on advertising-directly impacting WM Technology's average revenue per client, topline growth, and future earnings.
  
• Uncertainty and legislative volatility in the hemp segment, demonstrated by fluctuating bans and regulation at both state and federal levels, are constraining WM Technology's ability to diversify and grow new verticals, risking stagnation or decline in revenue if core markets do not recover.
  
• Decreasing average monthly revenue per paying client-driven by lower initial spend from new clients in emerging markets and declining spend in mature markets-suggests that organic growth is coming from less-profitable sources and may not offset losses elsewhere, putting further pressure on revenue and long-term financial stability.
  
• Heavy exposure to cannabis-specific advertising and marketplace fees, coupled with industry-wide capital scarcity and client exits from difficult markets, signals an overdependence on a challenged sector, increasing risks of volatility in revenue and profitability as secular and company-specific headwinds persist.

Valuation

• The analysts have a consensus price target of $2.61 for WM Technology based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $212.9 million, earnings will come to $37.8 million, and it would be trading on a PE ratio of 18.5x, assuming you use a discount rate of 8.8%.
  
• Given the current share price of $1.25, the analyst price target of $2.61 is 52.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.