Why WM Technology Stock Was Surging Today

What happened

Shares of WM Technology ( MAPS 4.46% ) were up 25% as of 2:53 p.m. ET on Thursday after reporting strong growth for the fourth quarter.

Revenue accelerated to 22% growth over the year-ago quarter. Excluding certain retailers in Canada that failed to provide valid license information and were removed from the Weedmaps marketplace, revenue grew 39% year over year.

So what

Demand for the Weedmaps app is looking strong right now. Monthly active users grew 57% year over year to 15.7 million. That is a faster rate than the third quarter’s 37% increase. 

Moreover, average monthly revenue per client, excluding those retailers that were removed from Weedmaps, grew 9%.

In the press release, CEO Chris Beals said,

We believe our growth in the current environment underscores the value we continue to deliver to our clients and is evidence of how they fundamentally understand the importance of Weedmaps to grow their businesses. I’m excited by the opportunities ahead of us in 2022.

A person with a bicycle using a mobile app on a city street.

Image source: Getty Images.

Now what

Management is calling for first-quarter revenue to grow between 31% and 36% year over year, with full-year revenue up 32% to 37%. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) is expected to break even in the first quarter, with full-year adjusted EBITDA reaching between $15 million to $20 million on about $260 million in revenue at the midpoint of guidance.

The stock has fallen 78% over the last year, but it might be bottoming out after two consecutive quarters of strong growth. Even after the post-earnings pop, the stock is selling at a forward price-to-earnings (P/E) ratio of 50 based on 2022 earnings estimates. But looking ahead to 2023 estimates, the stock sells for a forward P/E of just 21, which could underestimate Weedmaps’ potential to help businesses connect with customers in the cannabis industry.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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