A large segment of the American population isn’t going to get a vaccine despite all the scientific evidence they should. Another large segment has been gobbling up Microvision (NASDAQ:MVIS) shares over the past year. If you bought MVIS stock a year ago and still held as of March 15, you’re up more than 10,000% over the past 52 weeks.
My biggest question for anyone who did: Why?
My biggest question for anyone buying today: Why to the power of 10?
InvestorPlace’s David Moadel believes Microvision’s lidar (light detection and ranging) technology makes it an essential piece of the autonomous driving puzzle and an excellent pure-play on lidar’s future.
I say, “Poppycock.” Here’s why.
We’re in a Lot of Trouble if Microvision Is Our Salvation
Nothing against the good folks at Microvision, whose history dates back to 1993.
A pioneer in laser beam scanning (LBS) technology marketed under the PicoP brand name is pivoting to capture the future market demand for lidar technology. It would be ignoring its fiduciary responsibility if it didn’t.
But that doesn’t mean it’s going to capture a big slice of the lidar market in much the same way Koss (NASDAQ:KOSS) isn’t going to capture the headphone market with Apple (NASDAQ:AAPL) continuing to dominate the field.
One look at Microvision’s investor relations site tells me that it isn’t anywhere near prepared for big-time competition from companies such as Velodyne Lidar (NASDAQ:LIDR) and Luminar Technologies (NASDAQ:LAZR).
Its latest presentation is from May 2020. Before that, it was November 2019. Hardly just-in-time investor engagement. I’ve seen much smaller companies provide much better investor communications.
I don’t see Microvision being the kind of company that innovates fast enough to interest Cathie Wood and the ARKK Innovation ETF (NYSEARCA:ARKK).
However, I’ll definitely admit I was wrong if she buys some, but you shouldn’t hold your breath.
MVIS Stock Valued at $2.6 Billion
In the company’s Q4 2020 results, it saw revenues fall by 91% to $395,000. In the full-year, revenues were down by 65% to $3.1 million from $8.9 million in 2019. On the bright side, it cut its annual operating loss by half to $13.6 million.
At the end of 2020, Microvision had an accumulated deficit of $586.2 million. In 1996, it had a surplus shareholder equity of $13.5 million. By 1999, it fell back into deficit territory with -$39.5 million. Over the next 21 years, Microvision managed to grow its deficit by 13.7% annually.
Now, admittedly, a large accumulated deficit doesn’t mean you shouldn’t still consider investing, but it should make you wonder why it’s been unable to reverse the tide. This is not a case of it being in the right place at the right time. Like many smaller biopharmaceutical companies trying to ride the Covid-19 gravy train, Microvision’s doing the same with autonomous driving.
As I said earlier, it would be irresponsible of the company not to.
But consider the major winners in the Covid-19 sweepstakes. At the moment, there are three in use: Pfizer (NYSE:PFE), Moderna (NASDAQ:MRNA), and Johnson & Johnson (NYSE:JNJ). Their market capitalizations are $195 billion, $55 billion, and $420 billion, respectively. Only Moderna could be considered an outsider, but even it had a decent-sized market cap before Covid-19 struck in March 2020.
My colleague argues, with an assist from InvestorPlace’s Luke Lango, that as a pure-play Lidar specialist, Microvision could be in line to hook up with Apple to develop its self-driving car.
Apple could partner with any company in the world. Why in god’s name would it choose one that can’t even bother to put some lipstick on its investor relations site. It isn’t Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B), for goodness sake.
The Bottom Line
Every day, I write down something that I’m grateful for. While I’ve already done today’s exercise, I’m grateful I wasn’t writing about stocks in 1999 because I would have lost my mind writing about all kinds of companies trading at ridiculous valuations with not much more than a hope and dream.
At 790 times sales, Microvision is one such company.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.