MicroVision (NASDAQ:MVIS) stock is still a Reddit darling. Despite lackluster earnings, MVIS stock is up 50.7% in the last month and shows no signs of slowing down.
But before we delve further into the matter, it is important to note how we got here.
MicroVision develops laser scanning technology for projection, 3D sensing and image capture. Although the company has been in business for more than two decades, it has developed nothing scalable.
However, in April 2021, MVIS stock surged after being discussed on r/WallStreetBets and was up more than 7,600% over the past year. That kind of movement is not unusual if you are keeping up with Reddit stocks.
Much like other popular stocks in the Reddit space, MVIS is highly shorted. That means there is every possibility that this company will continue to see massive gains moving forward.
However, for a risk-averse, savvy investor, it is the right time to take your profits and invest elsewhere. There are plenty of stable investments out there trading at a steep discount.
Tesla and the MVIS Stock Surge
The main reason for the surge in MVIS stock is undoubtedly due to r/WallStreetBets. However, there is other news that is pushing these shares higher.
A Model Y electric vehicle owned by Tesla (NASDAQ:TSLA) was recently photographed using lidar, which stands for Light Detection and Ranging, basically, a sonar that uses pulsed laser waves to map the distance to surrounding objects.
A large number of autonomous vehicles use it to navigate environments in real-time. The news led to speculation that Tesla is testing lidar for use in its EVs.
Now, where does MVIS fit into all of this? Well, the company is working on its own lidar solution for quite some time now.
“I believe our differentiated, high-performance lidar sensor has the potential to advance autonomous driving and active safety systems beyond current sensors announced in the automotive market,” CEO Sumit Sharma offered during a recent update. “I expect that a version of this lidar sensor could be available for sale, in initial quantities, in the third or fourth quarter of 2021.”
Now, it’s a stretch to consider that Tesla is looking to partner up with MicroVision or outright purchase the company. Up until now, Bloomberg has reported that Elon Musk’s EV maker was testing lidar made by Luminar (NASDAQ:LAZR), a leading company in the space.
But take all of this news with a grain of salt. Tesla CEO Elon Musk has criticized the technology in the past, and according to unnamed sources quoted by Bloomberg, Tesla may be solely comparing its own technology to that of Luminar, or it “also could be testing lidar for future use.”
At this point, even threadbare news regarding these Reddit stocks will help them shoot to the moon. However, it is important to separate the wheat from the chaff.
Dismal Quarterly Earnings
At the end of the day, numbers will decide the future of MicroVision.
On April 29, the company reported quarterly revenues of $0.5 million, compared to $1.5 million for the first quarter of 2020. Net loss ballooned to $6.2 million, or $0.04 per share, compared to a net loss of $4.9 million, or $0.04 per share last year. The EPS figure fell short of analyst expectations by a whopping 60%.
On a trailing twelve months basis, revenue has fallen 75.3%, but the stock has an incredible one-year return of 1699.2%.
This company has had 14 years with negative operating cash flow. No company can survive long with negative cash flow, and this is a major red flag for anyone looking to invest in MVIS stock.
However, there is one area in which the company has done really well, raising cash. MicroVision ended the first quarter with $75.3 million in cash, compared to $16.9 million in the year-ago period.
The cash has been raised through a mix of equity and debt. I don’t believe shareholders will mind these capital raises. You could argue that stockholders seldom are in favor of dilution but will stomach it if it leads to higher margins and profitability.
Since that is not happening, the increase in reserves can hardly be seen as a silver lining.
Time to Disembark
It has been a great year for MVIS stock. Like so many others, Redditors plucked this from obscurity and ran with it to great heights. And the fact that 21.6% of shares are shorted compared to the float may make you think more money can be made on this investment.
However, it is time to cash in your winnings and invest in more steady options. You do not want to be left holding the bag when it’s all said and done.
On the date of publication, Faizan Farooque 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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.