The red-hot return of Microvision (NASDAQ:MVIS) in 2021 might be surprising to some. After all, the company suffered a near delisting in 2019 and a failed buyout attempt last year. But, despite the odds, MVIS stock is now trading at over a $2 billion market cap — up over 198% year-to-date. The reason for its newfound success? Claims of new autonomous driving technology that might make it a leader in the space. As exciting as all of this sounds, investors should still beware the hype.
To quote an age-old adage, while history never repeats itself, it often rhymes. Despite the promise of game-changing autonomous driving technology and talk of a potential buyout, Microvision could easily drive off another cliff. (It has done so in the past.)
Here’s a closer look at why MVIS stock is one to avoid.
Not the First Rodeo
What many folks don’t realize is that this is Microvision’s second shot at potentially game-changing technology. The first time, during the early 2000 tech bubble, the company’s PicoP laser sensing and scanning engine promised to revolutionize cell phones.
Roughly the size of a business card and only several millimeters thick, PicoP embeds into any small mobile device, allowing it to project high quality images onto any flat surface. While the idea of embedding a projector in a mobile device sounded great initially, it was quickly rendered moot with the birth of the smartphone. Despite management’s evangelism, most other uses for projection technology — smart glasses, virtual restaurant menus, interactive displays and home automation — have proven too geeky and impractical for real commercial use.
Today, even though MVIS is a 28-year old company boasting a portfolio of over 500 patents, it hasn’t converted any of this IP into licensing revenue. Nor has it been able to land a direct purchase from a technology or industrial company.
In fact, Microvision recorded Q4 revenues of $395,000. This is the lowest figure reported by the company in the past 10 years. Adding salt to the wound, MVIS reported zero in inventory on the balance sheet for its entire 2020 fiscal year.
MVIS Stock: A Road to Nowhere?
Twenty years after its first disaster, Microvision is back with its latest moonshot. The company is feeling especially confident about its latest hardware release focused on the automotive safety market. This time, the company is in the right place at the right time.
But I’m still not convinced it has the goods.
Expected this month, Microvision’s latest long-range LiDAR sensor (LRL Sensor) is the culmination of over two years of product development. LRL uses a pulsed laser to detect distance, velocity and angle with high precision. In practice, LiDAR (light detection and ranging) technology allows vehicles to scan the road for nearby pedestrians, obstructions and other potential hazards. There’s no doubt this is a massive addressable market, supported by autonomous vehicle rollouts by every major car manufacturer.
If Microvision’s latest claims are true (we’re waiting for the actual data), its LiDAR technology would be the best and lowest cost in the market. Management boasted the industry’s longest projection range (over 250 meters), superior resolution (roughly 7x competitors), low latency and reduced interference from sunlight and other LiDARs. Moreover, it says it can price its technology below $1,000 per vehicle.
With all this hot technology in the pipeline, management hasn’t been shy about telling investors it’s looking at strategic options — either for licensing its intellectual property or attracting a buyer.
We’ve Seen This Story Before
On the surface, things at Microvision sound pretty good this time. And that’s exactly the reason to avoid MVIS stock. Remember? History often rhymes.
There’s a big difference between marketing a technology and actually delivering it. Microvision’s success hinges on whether its LiDAR technology is truly real and ready for prime time. If you pay attention, you’ll see there are two big risks here.
First, even if the company’s technical claims are true — that’s a big if, considering it hasn’t actually shown the product or detailed specs — they won’t be much better than the “active safety” features already on the market. So while the technology can avoid large objects, like cars, it won’t ensure safe and reliable detection of smaller obstacles. Getting to these next-level safety solutions is still years away and requires a tremendous amount of hardware and software development.
Furthermore, Microvision isn’t the only LiDAR player who hasn’t yet made a next-level solution. In fact, no company has the whole enchilada: the right combination of distance, form factor, resolution, field of view, power consumption and cost. That could explain why MVIS, like every other LiDAR technology player, tends to “cherry pick” its best specs instead of disclosing its performance across all key metrics.
Even if Microvision’s promised specs are real, there’s little chance they’re next-level.
Everything Counts in Large Amounts
Second, with over 100 long-range LiDAR sensor companies in the market, including substantially bigger and better-capitalized players, there’s no evidence that Microvision is the winner here.
Since announcing its LiDAR growth opportunity in 2016, MVIS has spent approximately $70 million on R&D (across all its product lines, not just LiDAR). While that’s not exactly pocket change, companies such as Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Tesla (NASDAQ:TSLA) and Uber (NYSE:UBER) have collectively invested hundreds of millions on developing and enhancing autonomous driving technology.
Also in the market are more focused and vertically integrated automotive technology companies. This includes companies like Veoneer (NYSE:VNE), Aptiv Plc (NYSE:APTV), Luminar Technologies (NASDAQ:LAZR) and Velodyne Lidar (NASDAQ:VLDR). All of these competitors have closer ties to automakers than Microvision.
Let’s Get Real
Right now, the hype around MVIS is about two things. First, there’s no doubt that collision avoidance technology has an important role to play in the automotive industry. Second, with so many players touting solutions, the market is likely to consolidate. That said, MVIS stock is a highly speculative name.
There’s simply no evidence that this company has anything other than a good marketing story. With a short interest of roughly 15% of shares outstanding, market jitters will continue to make this a bumpy ride.
It’s best to avoid the crash.
On the date of publication, Joanna Makris did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Joanna Makris is a Market Analyst at InvestorPlace.com. A strategic thinker and fundamental public equity investor, Joanna leverages over 20 years of experience on Wall Street covering various segments of the Technology, Media, and Telecom sectors at several global investment banks, including Mizuho Securities and Canaccord Genuity.