MicroVision, Inc. (NASDAQ:MVIS), a maker of automotive safety and autonomous vehicle technologies, surged in 2021 when it was trading at more than $20 per share in June. Lately, not so much, with a recent closing at $7.58 on Nov. 22, 2021. And there is a good explanation for this highly volatile stock price history.
For starters, MicroVision has a beta of 3.6 according to Yahoo! Finance. It is a stock that in theory moves almost 3 times as much as the performance of the S&P 500.
With a year-to-date return of 28.8% for the S&P 500 and the year-to-date return of MVIS stock of 33.8% , MicroVision have almost perfectly been materialized.
The problem with MicroVision is that statistics do not always reveal the whole truth. Because ignoring the fundamentals of MVIS stock, investors may think that its business is thriving, that there is plenty of good news but this is not the truth. Starting from the business model, there is good news, but bad news overshadows it.
Business Model: Waiting for Revenue Growth
On its official website, MicroVision mentions that it has: “The industry’s highest resolution, full velocity, long-range automotive lidar sensor.” It also states that, “MicroVision’s lidar technology enhances the capabilities of drivers to respond to everyday driving conditions.”
The key advantages of this lidar technology for the automotive industry includes a range of 250-meter, highest resolution, perception software, object velocity, interference immunity, and low latency.
Could it be that MicroVision’s lidar technology becomes a big hit in the automotive industry? We do not know. What I know is that for sure features such as scalability, reliability and cost-effectiveness are highly desirable for almost the majority of products.
In April 2021, MicroVision announced some very positive news that it had completed its “Long-Range Lidar Sensor A-Sample Hardware and Development Platform.”
It also mentioned that it was ready to demonstrate the key benefits of its “long-range lidar sensor to potential customers, partners, or parties interested in strategic alternatives.”
In July 2021, more good news was released about the opening of a German office for further business development and promoting its “automotive lidar,” which should support MVIS stock. But it did not.
The last good news about MicroVision was that it would be added to Rusell 2000 index on June 28, 2021. The inclusion in Russell 2000 did not support the stock either — as of summer 2021, there has been a selloff. What is next now for MicroVision?
Net Losses and Stock Dilution
If MicroVision wants to become a leader in the automotive industry, then it should start generating revenue — a lot of it, because the fundamentals now are very weak. For the first quarter of 2021, revenue reported was $0.5 million, compared to $1.5 million for the first quarter of 2020. MicroVision’s net loss for the first quarter of 2021 was $6.2 million, compared to a net loss of $4.9 million for the first quarter of 2020.
MicroVision has diluted its stock repeatedly since 2017 with the latest news of a $140 million At-the-Market (ATM) equity offering announced on July 21, 2021.
With a negative operating income and negative free cash flows, MicroVision is now getting cash for business expansion but at the same time, it burns cash and doesn’t have any significant revenue. For a market capitalization of $1.18 billion, analysts expect an average revenue of $2.49 million.
I totally understand the need for MicroVision to find financing solutions and support its business operations. Raising equity is in most cases an effective way to raise cash, and a cheap way compared to raising debt.
In fact, due to the weak trend of revenue for MicroVision for the past two consecutive years (it reported sales of $8.89 million in 2019 and $3.09 million in 2020), equity offerings seems to be the only way for this technology company to raise cash.
But this is not good for the shareholders, who are after the intrinsic value of the stock. So, there is a big discrepancy now as to what management says and what is really happening to increase shareholder value. If MicroVision was to become a potential acquisition target by an automotive maker then this would be beneficial for its shareholders.
There would be value perceived related to the technology MicroVision has developed. But I am wondering if the development of the lidar technology would be good for MVIS stock or if it would be a major setback. Will MicroVision not need to invest more capital expenditures now that it’s ready to start selling its automotive lidar technology? Further capital expenditures will weigh in weaker free cash flows, with already a history of negative operating income.
MVIS Stock: Waiting for Q3 2021 Report
MVIS stock must become more than a meme stock if it wants to create real shareholder value. Until this is real rather than hopes, the MicroVision valuation is too elevated, with very poor fundamentals. Waiting for significant revenue growth and profitability to occur is a prudent investment decision now.
On the date of publication, Stavros Georgiadis, CFA 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.
Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.