Is Microvision (MVIS) a Good MEMS Stock to Invest In?
We’ve written before about the potential of Microelectromechanical systems (MEMS), a market which is growing rapidly and reached over $12 billion in 2013 with projections of yearly CAGR of +12% going into 2018. A MEMS device will typically consist of a microprocessor and any number of components that interact with the surroundings such as microsensors that detect temperature, pressure, movement, and light. For example, if you noticed that your smartphone screen auto-rotates when you tilt it, this is because a MEMS sensor detects the phone’s position. Privately held mCube and publicly traded Australian firm Bluechiip (ASX:BCT) are both MEMS companies we’ve written about before. One other MEMS company that came across our radar recently is Microvision (NASDAQ:MVIS).
Founded in 1993, Seattle based Microvision (NASDAQ:MVIS) has developed a MEMS device that enables small profile devices such as mobile phones with the ability to project media onto flat surfaces such as the example shown below:
As of their last filing, MVIS has burned through over $472 million and has yet to see meaningful revenues as a result. The Company sits on $16.6 million in cash currently, and through all their spending, has managed to build a relatively strong patent portfolio over the years as seen in the below chart:
The Company developed their own SHOWWX™ line of pico projectors such as the one seen below but those never really took off.
In 2012, Microvision decided not to invest in their own product line anymore and instead license their technology to OEMs. Their big break came in March 2015 when MVIS signed a license agreement with Sony for their PicoP® display technology. The license agreement granted Sony a non-exclusive license to MicroVision’s PicoP display technology for use in display modules it manufactures and sells. As part of the agreement, MVIS received an $8.0 million upfront payment and will receive a per unit royalty for each display module sold by Sony. This one commercial customer accounted for 97% of their total revenue for Q1-2015 which was just under $1 million. Microvision has a current backlog of open orders totaling $18.7 million.
If you invested in Microvision exactly 5 years ago you would have lost -90% of your investment. Long term investors who are still sitting on such losses can do nothing else but hope that the company can recoup all those losses eventually. However, investors who bought MVIS just 1 year ago would be sitting on gains of around +40%. At a current price of $2.87, MVIS has a market cap of just around $140 million.
The technology is interesting and after burning through over $470 million in cash, we can assume the patent portfolio has some value to it. However, the prospect of all revenues tied to a single customer is hardly promising. There are many other companies with pico projection technology that is compelling both in price and functionality, and doesn’t use MVIS technology. Take the popular RIF6 Cube as an example:
Let’s hope that this single high-profile customer currently evaluating the MVIS projection technology helps bring other customers on board or outright acquires Microvision. Until then, there’s a fair deal of risk associated with MVIS and it seems more suited for speculators than investors.
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