As Lidar Plays Go, Don’t Forget The Opportunity Cost of MicroVision Stock

What a year it’s been for MicroVision (NASDAQ:MVIS). Up 72.1% year-to-date, investors who bought MVIS stock at the end of 2020 have got to be giddy. 

LiDAR sensors show car sensing traffic around it. LAZR
Source: Shutterstock

Yet, despite its ups and downs in 2021 — including touching a high of $27.80 a share on April 26 — the stock price has tread water since early February.

In the meantime, the S&P 500 index is up 20.7%. Such is the opportunity cost to owning MicroVision.

The Federal Reserve Bank of St. Louis defines opportunity cost as “the value of the next-best alternative when a decision is made; it’s what is given up.”

So, in the case of MicroVision, you are giving up a stable return from some of America’s largest companies to place a bet on a technology company that’s heavily in the red to make a big payday from its LIDAR (light-detection and ranging) technology. 

The Downside of Speculating on MVIS Stock

There’s nothing wrong with betting on up-and-coming technology. However, unless you’re independently wealthy — that means you make money even if you sleep all day, 365 days of the year — based on a $10,000 bet, you’ve given up a $1,700 gain for bupkis.

If you do that long enough, inflation is going to drive you into poverty. So without even considering the long-term prospects of MicroVision, you’re already behind the eight-ball. 

When I last wrote about MicroVision in early July, MVIS stock was trading at $10.78. I recommended investors sell the stock because insiders didn’t have enough skin in the game. 

At the same time, I suggested investors buy Luminar Technologies (NASDAQ:LAZR) instead. Unfortunately, it’s faring even worse. It’s down 25% in the same period. So, you could say that the opportunity cost of buying my recommendation was a 13% unrealized loss relative to buying MVIS.

Long-term, I still believe LAZR is the better bet. 

Why I Like LAZR Over MVIS

In the trailing 12 months (TTM) ended Aug. 4, MicroVision had $2.26 million in revenue and an operating loss of $27.56 million. At the same time, LAZR’s TTM revenue through Aug. 12 was $18.28 million, with an operating loss of $125.6 million. 

MicroVision’s operating margin is -1,219.5%. Luminar’s is -687.1%. So they’re both awful, but MicroVision’s is worse. 

Here’s what I had to say about both stocks in early July:

Although my January article recommended investors consider investing in ARK Autonomous Technology & Robotics ETF (BATS:ARKQ) as a safer alternative, I believe a LAZR buy in the mid-$20s for patient investors will be rewarded in 18-24 months. In every way, LAZR is a superior stock to Microvision.

To date, investors aren’t convinced that’s the case.

However, as my InvestorPlace colleague David Moadel argued in mid-September, Luminar expects to generate $31.5 million in revenue at the midpoint of its guidance for 2021. That’s up from its previous guidance of $27.5 million at the midpoint and $14.0 million in 2020.

Business is improving. 

“So, did Luminar actually just have its ‘most incredible quarter yet?’ The data seems to indicate that Q2 2021 was, indeed, replete with positive developments for Luminar,” Moadel wrote on Sept. 15. 

“Yet the LAZR stock price remains depressed. That’s perfectly fine, as it’s a prime opportunity to capitalize on the exciting lidar market today. Interested investors should consider the dip in price a buying opportunity.”

Board Differences

One of the differences that jump out at me between the two companies is their respective board of directors. Specifically, one name catches my interest: Alec Gores

Gores is the CEO of The Gores Group, a Los Angeles-based private equity firm that has invested more than $4 billion for its clients since its founding in 1987. Even though Gores is on Lidar Technologies’ board because his SPAC (special purpose acquisition company) merged with it, he brings to the table an excellent understanding of what constitutes value and opportunity. 

For my money, the opportunity cost of owning MicroVision is the long-term gains you will miss out on by not holding LAZR. 

I remain convinced LAZR is a better buy than MVIS stock.

On the date of publication, Will Ashworth 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 Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

Article printed from InvestorPlace Media,

©2023 InvestorPlace Media, LLC