MicroVision Seems Like the Honeypot of the Lidar Industry

From a quick bird’s-eye-view, I can appreciate why so many people gravitated toward MicroVision (NASDAQ:MVIS). As one of the more popular meme trades, several people from social media platforms, many of which seemingly had little to no prior investing experience, jumped on the bandwagon for MVIS stock. And look, the performance speaks for itself, with shares up nearly 236% year-to-date.

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But the other reason why MVIS stock ranks highly among social media traders is the underlying fundamentals. Specifically, MicroVision pivoted to automotive lidar systems, which makes sense in that the company originally focused on proprietary imaging technologies. Further, driverless technologies are all the rage these days, with powerhouses like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Tesla (NASDAQ:TSLA) competing for automated glory.

Still, competing in a sector is one thing. Having a credible shot at victory is another. And that’s where the problems have started to pile up for MVIS stock. In the trailing week of June 23, 2021, shares have dropped nearly 14%. Overall this year, as I mentioned earlier, shares are up big. But the risk is that early stakeholders should consider profiting handsomely while they can.

Perhaps the most conspicuous threat for MVIS stock is the market erosion of direct competitors in the lidar space. A prime example is Velodyne Lidar (NASDAQ:VLDR), which enjoyed significant hype prior to its public market debut. But on a YTD basis, VLDR hemorrhaged 47% of market value.

Or you can look at rival Luminar Technologies (NASDAQ:LAZR). Generally, the investment community had high hopes for LAZR, considering that the underlying company has a relationship with Volvo (OTCMKTS:VLVLY). But that hasn’t helped out LAZR stock, which is down more than 28% YTD.

The point isn’t to trash these other lidar companies, not at all. Rather, if they’re struggling, you’ve got to imagine that the future isn’t that appealing for MicroVision.

Litany of Challenges Ahead for MVIS Stock

But competition is just one headwind stymieing the potential progress of MVIS stock. Mainly, the underlying company itself has failed to provide confidence for prospective buyers. Its latest first quarter of 2021 earnings report provides a clear example.

During the three months ended March 31, MicroVision generated revenue of $480,000, which is staggeringly low compared to Q1 2020, where the company posted sales of $1.47 million. This is a good time to remind people that according to Gurufocus.com, the revenue per share for MVIS stock is zero. It’s not literally zero but the website only drills down into the hundredths.

That right there should tell you about the equity unit’s dilution. But MVIS stock features a market capitalization of nearly $3 billion. Try to make sense of that.

Well, you can’t and that’s the point — apparently no one can, not even the management team. Recently, MicroVision made news for the wrong reasons when it “announced a $140 million equity offering agreement.” To me, this is one of those the-call-is-coming-from-inside-the-house moments. After posting what many analysts saw as a disappointing Q1, MicroVision is now selling shares.

Whatever the motivations, it’s just not a great look. That’s all the more pertinent when you consider that many rookie investors are buying in on the narrative that MVIS stock could be the next big thing. It seems that those closest to the business don’t even believe that.

To be fair, MicroVision asserts that it’s on track with its lidar program. Further, after extensive testing and validation, the company’s lidar products could be available for initial sale in Q3 or Q4.

Even so, the competition isn’t going to hit the brakes for MicroVision. And even with their higher performance and credibility, they’re not getting the job done.

Driverless Industry Could Be a Bust

There’s also the nagging question about the viability of the driverless industry. According to Missy Cummings, director of the Humans and Autonomy Laboratory at Duke University, “the so-called deep learning that cars need to see the road around them doesn’t actually learn.”

If that’s the case, that’s a serious problem for MVIS stock and any investment exposed to the lidar sector. It would mean that even if the systems can see vehicles and obstacles around them, they may not be able to interact properly.

Of course, the overriding lesson over the trailing year is to never underestimate the power of the internet. I get that. But phenomena like this tends to fail over time. Therefore, I’m avoiding this trade due to the myriad risk factors involved.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


Article printed from InvestorPlace Media, https://investorplace.com/2021/06/mvis-stock-honeypot-lidar-industry/.

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