If you’re interested in owning MicroVision (NASDAQ:MVIS) you might be wondering if now is a good time to dive into MVIS stock. Let’s take a look at the recent drivers in MVIS, where shares may be headed next and make a risk-adjusted spread aligned with those findings.
By some measures MicroVision investors have enjoyed a banner 2021. The lidar play is up 76% year-to-date.
The gains in MVIS stock gains look all the more attractive compared to larger rivals Luminar (NASDAQ:LAZR) and Velodyne Lidar (NASDAQ:VLDR). (Shares of LAZR and VLDR stock are off about 40% and 70%, respectively).
Yet MVIS stock also reinforces that timing can be extremely important if an investor’s performance is going to go “ape.” The fact is there was a time, not too many months ago when MicroVision was one the market’s targeted Reddit plays.
Breaking Down MVIS Stock
MicroVision featured spectacular rallies similar to those enjoyed by meme and short stock celebrities GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC). With its heavier short-interest, smaller capitalization and promised technology, MVIS has been a card-carrying member.
Not unlike the majority of stocks finding the interest of Reddit’s apes, MVIS stock has proven a two-way street with outsized volatility in 2021. That leads us back to a much more elusive than advertised 75% gain in MVIS shares.
For some MVIS investors, the burly return has been completely turned upside down. Compared to today’s share price just north of $9, Microvision has lost 68% since its peak valuation of $28 in June. What’s more, for more investors and flat-footed bullish apes, in a full nine calendar month’s this year, MVIS stock has fetched more than today’s $9 market price.
It’s fair to say there’s a large number of MicroVision stakeholders that are underwater. And on that basis maybe MicroVision seems reasonably cheap.
But is MVIS a discounted stock which offers investors more value going forward?
Of potential benefit, MVIS offers ownership in its innovative laser beam scanning (LBS) PicoP technology. And MicroVision’s intellectual property could prove a stronger solution than its competition, which mind you, is critical to making fully autonomous vehicles a reality. But can it or will it, for that matter?
As InvestorPlace’s Joseph Nograles notes, Microvision’s growth story is barely about today. The big driver for MicroVision, as well as possibly its competition, is landing a significant original equipment manufacturer (OEM) deal.
Today, MVIS and its peers are all waiting on that first large contract. And it could be close by.
With new EV models set to offer more advanced driver assistance systems (ADAS) with lidar as a primary sensor, MVIS’ management anticipates the market’s OEM’s will be deciding on partners shortly.
There is other good news. Even with increased cash burn over the past 12 months, MVIS maintains ample liquidity for the next 4 to 5 years. Nice, right?
Obviously, cash reserves are better to have than not. But given today’s monthly price chart, bullish or bearish investors should have other more immediate drivers to seal their own critical deals in MVIS stock.
MicroVision’s Monthly Price Chart
Source: Charts by TradingView
As MVIS stock’s monthly chart reveals, shares are stationed in an inside candlestick pattern that’s challenging the 76% Fibonacci level tied to its all-time, Covid-induced low. An oversold stochastics speaks also to the severity of the price decline since reaching an all-time-high of $28 in April.
But in order for MVIS stock to worth buying, some clear and essential confirmation is required.
First, the easy observation is pattern support needs to hold. Second, MicroVision shares need to confirm a low on the monthly perspective. Further, both those criteria should have the full backing of a bullishly aligned stochastics indicator.
The reality of course is this type of confirmation could reasonably happen as part of a more significant price gap on OEM news, whispers of a win or that sort of bullish scenario.
Alternatively, a failure to negotiate a deal or MVIS’ competition securing a partnership or multiple deals could result in continued bearish volatility.
So what’s an investor to do? If you are attracted to purchasing MVIS stock, recognize that MicroVision remains a riskier and event-driven name. Then, and to profit smartly from a more bullish but still uncertain 2022, a fully hedged May $12/$20 vertical looks like a solid move.
Based on what we’re seeing off and on the price chart, this spread should offer sufficient time for either substantial profits to play out or much less downside exposure in the event the bears have it right in MVIS stock.
On the date of publication, Chris Tyler 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.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
