In an often-unhinged market this past year, Microvision (NASDAQ:MVIS) stock investors stood out as an insatiable group. But today and MVIS stock’s most greedy behavior downsized, does a cheaper share price equate to better value? Let’s look at what’s happening off and on the price chart, then offer a risk-adjusted determination aligned with those findings.
Is the glass half full or empty? It’s an age-old question without a one-size-fits-all answer. But as this type of situation relates to Microvision’s 50% retracement of its left-for-dead pandemic low of 16 cents to recent February high of $24.18, which might it be? Is MVIS stock a buy or a sell?
Wall Street is said to hate uncertainty. And at this moment in time, the observation is finding clarity in this lidar play is an extremely challenging proposition. And that goes for both MVIS investors eyeing shares where the sky is the limit or those seeing a move back toward penny-stock obscurity. But don’t take my word for it, just look at the evidence.
A Bit of Recent and Not-So-Recent History
On the price chart MVIS’ recent and dizzying rally was among the best in a market with no shortage of unproven winners. I won’t bore you with the percent run-up given the incredibly low bar set for the stock’s launch pad. But the stock run-up did bring real value to the table with shares valued at nearly $4 billion at the height of the feeding frenzy.
Chalk it up to short squeezes, electric-vehicle themed enthusiasm and what have you, Microvision had a piece of the action. Today is entirely a different story.
Along with stock bonanza’s gone wildly wrong in GameStop (NYSE:GME), QuantumScape (NYSE:QS) or closer to home, MVIS’ direct competition Velodyne Lidar (NASDAQ:VLDR) or Luminar Technologies (NASDAQ:LAZR), paybacks as some MVIS bulls have found, in a less forgiving, risk-averse environment, are a real, “you know what.”
A Difficult Forecast
Still, can MVIS shares bounce back or rather, turnaround from here? There is a chance. Or not. Again and right now, it’s simply hard to tell.
Today’s Microvision is, as referenced above, about lidar. Lidar refers to light, detection and ranging technology. And in the automotive industry it’s big stuff and expected to explode in growth with the arrival of autonomous automobiles. In layman’s terms, the technology allows vehicles to scan the road for potential hazards, including pedestrians.
Moreover and recently, Microvision announced an advance breakthrough which would make its lidar platform the best performing in terms of range and resolution and, drumroll please – the lowest cost in the market. Nice, right? Not so fast.
Verification of this exciting development is expected later this month. As it stands, MVIS investors are simply expected to take the company’s claim at face value. Worse, or don’t say you haven’t been warned, the potential hazard in believing in Microvision’s lidar without seeing the proof in the pudding, is a somewhat checkered company past.
Microvision has been around the block, and not in a good sort of way. Specifically, it’s been mostly in the shadows for 28 years with little to show other than one well-promoted and failed dot-com venture and a consistently risky financial profile despite boasting a portfolio of more than 500 patents. You could say MVIS hasn’t managed to put the rubber on the road to date. And you wouldn’t be wrong to do so either.
MVIS Stock Weekly Price Chart
Source: Charts by TradingView
The weekly price chart shows why, in certain circles, MVIS stock was the talk of the town this past year. The gains were fantastic and still amazing even if investors back out the first couple to few dollars of Microvision’s ascent from a penny stock on life support.
Today is different though. MVIS’ circle of followers is largely gone. And on the price chart investors are being greeted by a mostly symmetrical triangle.
In the formation’s defense and optimistically, triangles of this type are often continuation patterns. I also like that MVIS’ apex is slightly above the stock’s 50% retracement cycle from last March’s Covid low. As well, stochastics is in oversold territory and flattening in the direction of a bullish crossover. A breakout above $16 or so could lay the foundation for a meaningful rally to new relative highs.
There’s more to reflect on however and it’s rather ugly.
As today’s price action also reveals, MVIS is currently challenging triangle support. A failure could easily send shares toward the 62% level near $9.35. Worse and in our estimation, based on the size of the triangle, the 76% level and challenge of the $5 to $6 area is realistic given what we know and don’t know about Microvision’s second act.
Bottom line and with no axe to grind, bulls and bears need to be careful in today’s MVIS stock. However, if investors are more than just interested in watching from the sidelines, I’d strongly suggest a limited risk bull or bear vertical spread as a more appropriate way to gain exposure.
On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.