Microvision (NASDAQ:MVIS) stock may perfectly sum up the FOMO going on in the market. Shares are up 180% this year. At one point, MVIS stock was up 355%. However, this pure play on LiDAR technology looks to have some short-term concerns. And maybe some long-term ones as well.
What if I were to tell you that the company’s revenue has been steadily declining since 2016? And what if I went further and said that prior to 2020 the company was a legitimate penny stock for much of that time? Finally, what if I also mentioned the company has been in business for 28 years and is still not profitable?
Apparently, none of those things matter to the investor who has belief. In this case, retail investors are hyped about the company’s push to become a significant player in the automotive safety market.
LiDAR will be an essential component of autonomous vehicle technology, but while the technology may be a reality, an autonomous future looks years away.
Objects Are Further Away Than They Appear for MVIS Stock
I apologize for the cheesy turn of a phrase, but much of the hype around MVIS stock revolves around the company’s development of a LiDAR sensor (LRL sensor). These sensors will be essential for the development of Level 4 or Level 5 autonomous vehicles, and many investors are excited about this promising future.
Only the most bullish investor believes this future will be available in the next few years. Many industry observers think 2030 is a more realistic goal, and it most likely will be further away than that.
In the years prior to the pandemic, many developers scaled back on their autonomous development. Those that continue with development plans remain noncommittal on when anything can be rolled out.
You Have to Be Right Every Time
One of my concerns regarding a stock like Virgin Galactic (NYSE:SPCE) is liability. Sending civilian humans into suborbital space and back to a safe landing is not without risk.
They simply have to be right every time. That doesn’t mean the company won’t be successful, but it does mean that any timeframe is likely to be expanded.
The same seems true with autonomous vehicles. For example, Uber (NYSE:UBER) suspended its testing program despite many autonomous miles logged due to the unfortunate death of a pedestrian in 2018.
None of this is Microvision’s fault, but if an autonomous future is indeed years away from becoming a reality, it’s fair to ask MVIS stock investors to exercise caution.
Then there’s the competition, of which there is quite a bit. Right now LiDAR companies are picking up where electric vehicle companies left off, and, as with the EV sector, there seems to be a shiny object syndrome that’s creeping in.
Sure there’s going to be room for more than one company, but there are other companies that simply appear to be better investments in the sector.
The Payoff for MVIS Stock is Years Away
There are times when one of the InvestorPlace writers says it far better than I can. So I’ll give a cap tip to Joanna Makris who recently wrote this statement that should engender skepticism about MVIS stock.
“Today, even though Micro is a 28-year old company boasting a portfolio of over 500 patents, it hasn’t converted any of this IP into licensing revenue,” Makris wrote. “Nor has it been able to land a direct purchase from a technology or industrial company.”
Microvision does business in other sectors including home security and IoT products. However, it doesn’t appear that those businesses are causing excitement among investors. In 2020, the company’s revenue was 65% lower on a year-over-year basis.
That puts an asterisk in front of the company’s improved earnings. In 2020, the company reported negative earnings per share of nine cents which was significantly better than the negative earnings of 24 cents reported the prior year.
But to put all of that into perspective, MVIS stock was trading well below $1 for most of 2019. Institutional investors are staying far away from the stock and short interest sits around 15%.
The bullish case for Microvision is going to depend in large part on how quickly the market for autonomous vehicles becomes a reality, but that’s not a future that the company can speak into existence. Without that revenue, MVIS stock looks very overvalued.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.