The MicroVision Stock Forecast You’re Looking For
There’s a common misconception among Twitter critics – most of whom haven’t accomplished squat – that what’s keeping back would-be entrepreneurs from becoming billionaires is funding. They’ll posit it’s because some venture capitalists look the same, or dare ask critical questions of a business model with no regard for someone’s feelings. The truth is that throwing money at a good idea, spearheaded by someone who is mediocre at execution, won’t result in anything positive happening. We see this in the stock market as well.
In our previous piece on Vuzix, we noted that their inflated share price led to the company raising capital which should help them survive for quite a while. At least they have a hardware product that’s showing signs of life. But what happens when you throw loads of money at a stock that appears to be slowly dying? One such company is MicroVision (MVIS).
About MicroVision Stock
In the same way you might look at a candidate’s resume, let’s put aside the cacophony of drivel being posted on Reddit and focus on what this company has been able to accomplish over the past decade. The answer is, not much.
In 2018, the company said their revenues were derived “from development contracts and from license and royalty fees for PicoP® scanning technology.” In 2020, one customer represented 97% of their total revenue. Having a single customer is a huge risk, and that’s a showstopper for us.
If a given technology shows signs of traction, and then withers away, it typically means they didn’t nail product-market fit. In MicroVision’s latest 10-K, there’s a realization things haven’t panned out after burning through nearly $600 million trying to commercialize their technology. They reflect on their past goals of trying to commercialize augmented reality (AR) hardware and consumer LiDAR:
For the past few years, our strategy has been to sell AR displays or components, Interactive Displays, or Consumer Lidars to original equipment manufacturers (OEMs) and original design manufacturers (ODMs) for incorporation into their products.Credit: MicroVision 2020 10-K
They admit their shortcomings:
While we do have a well-known customer for one of these products which generates royalty income, the volume of sales and resulting royalties from that product are not significant, and we have been unable to secure additional customers to launch one of our products.Credit: MicroVision 2020 10-K
And then they announce the “strategic alternatives” kiss of death, what amounts to conceding defeat:
As a result, since February 2020, we have focused our attention on strategic alternatives, including a potential sale or merger of the Company, sale of part of the Company, strategic minority investment, as well as licensing and other transactions.Credit: MicroVision 2020 10-K
Then, they became a meme stock. Or did they?
Is MicroVision a Meme Stock?
In the past year, the stock price skyrocketed over +890% compared to a Nasdaq return of +58% over the same time frame. The same dire outlook hasn’t changed. Some say what changed was that Reddit manipulators got ahold of MVIS stock and decided to make it
a pump-and-dump a meme stock. Others argue the stock has always had a strong base of supporters on Reddit for a long time, and that only now are (wait for it) people starting to realize the potential of this company. Well, everyone except the company itself, which recently admitted to exploring strategic alternatives because they have little to show for after burning through nearly $600 million.
Debating whether MicroVision is a meme stock or not keeps people from focusing on what matters most. MicroVision is grasping at straws in an attempt to have a product to sell (they’re currently not manufacturing any products) and a customer to buy it.
MicroVision’s Q2-2021 Earnings Call
The first several pages of the call you can skip because they contain little substance. Yes, you’re testing products and trying to sell them to people, Yes, automotive LiDAR is a massive opportunity. Yep, that whole pandemic thing sure is a doozy. What really matters is how much revenues were realized. That number amounts to a paltry $746,000 that consisted solely of revenues from the April 2017 customer that suddenly they’ve decided to name – Microsoft (MSFT). Those royalties were credited against a “non-refundable prepayment” from Microsoft that took place in 2017, of which the balance currently sits at $6.5 million.
There’s a temptation to start asking questions around this mysterious royalty stream. For example, when do royalties accrue? What are they based on? Is there a time limit to these royalties, or a contract limit? None of the analysts on the call raise these questions, one of whom happens to be the brokerage firm that’s helping MicroVision raise up to $140 million from
future bag holders investors with a very high tolerance for risk.
One cannot fault MicroVision for raising money in their at-the-market ATM offering. Instead of issuing a batch of new shares and selling them for a fixed price, they’re working with a broker who takes their newly issued shares and sells them directly to the market, hopefully at the highest possible prices (shares of MicroVision briefly eclipsed $26 a share in April 2021). In the past quarter, they sold shares at an average price of around $17 a share.
In the second quarter we issued 4 million shares and raised $67.8 million in net proceeds.Credit: MicroVision 10-Q
As of just days ago, MicroVision had $135 million in cash and $72.2 million left they could raise from their ATM offering. When companies issue shares and sell them, they dilute existing shareholders, but retail investors never seem to monitor that. Just FYI.
The latest call talks about MicroVision’s sole focus on automotive LiDAR. Talk about a cramped space to squeeze into with a load of well-funded competitors. If we wanted to invest in cash-rich LiDAR companies that are publicly traded, we have plenty to choose from as covered in our piece on Four LiDAR Stocks That Debuted in 2020.
An MVIS Stock Forecast
How this company manages to have a $2.44 billion market cap is beyond us. Our simple valuation ratio is simply off the charts for MicroVision.
- $2,440 million market cap / annualized revenues of 3 million = 813
To put that number in perspective, the highest value we ever recorded was 100 for Desktop Metal. We won’t touch a stock with a valuation ratio over 40, nor will we touch a stock that’s being manipulated on Reddit. As of last year, this company was admittedly in an absolute world of hurt. Now that they’re able to raise money on the back of Reddit
promoters investors, they’re planning to have another go at becoming something great. Good for them, but we wouldn’t touch this story stock with a ten-foot pole.
A year ago, MicroVision traded at $1.50 per share. They’ve managed to raise some cash, but little else has transpired. Their investor deck is probably one of the most dreadful things we’ve seen in a while. Once the Reddit manipulators have unloaded all their shares, there will be little to support inflated stock prices which will quickly revert back to the mean. Plenty of bag holders will continue to hang on hoping that eventually the ship will be righted. We’ve seen this happen far too many times, and the outcome is always the same.
Wall Street analysts often try and set a future price target which is all but useless. A simple forecast for MVIS stock is that shares will trade for substantially less than today’s price of around $15 a share. While short term volatility may move MVIS shares all over the place, in the long run, shares will return to their true value. That’s the beauty of the efficient market hypothesis.
Why Not Short MicroVision?
It’s clear from where we’re sitting that this stock is going nowhere fast. If that’s the case, then why don’t we short it? Because the irrationality of the herd will always exceed your margin limits. Or in the words of someone on Reddit, “we can stay retarded longer than you can stay solvent.” There’s absolutely no way we’re shorting a meme stock. Ever. Sure, we could buy put leaps, but there’s also no way of telling how long this rollercoaster of manipulation will continue to run. Any attempt at trying to bet on when this absolute mess reverts to the mean is solely speculation. We’re investors, not speculators.
You may have bought this stock because some morons on Reddit told you it was the opportunity of a lifetime, and now you’ve been caught holding the bag. The same morons are now telling you to have “diamond hands” as they offload their shares, all while coming up with the same worn-out stories about how some conspiracy explains away your concerns.
If you’re holding shares of MicroVision right now, sell them and move on with your life. What you’re engaged in is speculation. It’s highly unlikely that a lack of capital is what’s holding this company back from success. The management team is fighting to do the single most important thing that any company can do – survive – and we wish them the best in that pursuit.
In yesterday’s piece on Robinhood Stock – An Expensive Free Trading App, we talked about how attention-driven trading results in negative returns as investors chase performance. Newbie investors often confuse share price movements born from manipulation as validation that a company has potential. In the case of MicroVision, we could care less what their share price does. It will eventually revert back to the mean, plenty of investors will be caught holding the bag, and we will have long moved on to researching bigger and better things.
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