Microvision (NASDAQ:MVIS) stock is looking cheaper and cheaper each day.
The run-up on MVIS stock at the start of the year was parabolic, so I am not surprised the company’s share price has corrected so sharply. Investors should remember regardless that the underlying company remains solid.
Even after its recent plummet from around $21 to $9 it still has added nearly 80% year to date.
Despite the lack of good news and the revenue miss, there are still plenty of reasons to be optimistic about Microvision’s future prospects.
Ignore Microvision’s Weak Earnings Report
Microvision’s latest earnings report was considered to be a disappointment by Wall Street investors. It cost the company at first, but MVIS made a comeback and will open today at about the same price it opened last Monday.
Reading through the earnings report, I couldn’t really see what the major concern would be for long-term investors. The company’s revenue was up 16% year on year at $738,991. Unfortunately, these revenues were roughly $102,000 shy of Wall Street estimates.
I believe analyzing Microvision’s revenue at this stage of the lifecycle is rather pointless. Missing $102,000 in revenue is inconsequential for a company with a market cap of $1.45 billion.
The current Price to Sales ratio of MVIS stock is a whopping 629x. So clearly this company isn’t valued for its current sales pipeline but rather the technology IP that it has.
The company has made improvements in its earnings. Its loss per share in Q3 2021 was -$0.06 per share. This was smaller than expected by -$0.03 per share.
Companies like Microvision are is still in the midst of developing their technology and market. Therefore, similar to any promising start-up, I like to examine the company’s liquidity and cash burn situation.
The company’s Adjusted EBITDA loss grew from negative $2.1 million to $6.2 million. More cash was used in Q3 2021 as well as the operations cash burn was $10 million compared to $3.5 million at the same time last year.
Microvision had cash and equivalents of $125 million ensuring at least 4 – 5 years of operations given its burn rate. This is sufficient time for the company to execute its plans.
MVIS Stock Could Rally
Microvision is a leader in LiDAR technology used for autonomous driving. In its earnings call management highlighted that no company has secured a meaningful original equipment manufacturer (OEM) deal.
Therefore this is still very much an open opportunity for level 2 plus and level 3 ADAS systems with LiDAR as the central sensor.
Management expects OEMs to make partnership decisions very soon. This is because new EV models with advanced ADAS features are set to be released.
Autonomous driving is shaping to be a key battleground among the various car manufacturers. I doubt that it would make sense for them to develop their own LiDAR technology from the ground up. Thus a partnership with companies like Microvision makes perfect sense.
The company has received numerous requests for information and proposals after its showing at the IAA Mobility Show. This isn’t surprising given the numerous advantages of Microvision’s LiDAR technology.
It seems the company has pursued a practical approach to designing its technology. Microvision’s sensors do not use any exotic materials. It also provides an overall lower system cost relative to its competitors.
“An ADAS solution integrated with our lidar would require a lower number of sensors to meet ADAS’ safety requirements and result in a lower overall system costs compared with the center stack utilizing lower resolution and lower frame rate lidar solutions,” management stated in the earnings call.
Investor Takeaway
The company plans to demonstrate its ADAS solution by June 2022. I know that’s a year from now and investors could be restless in the interim. Depending on the macro situation with inflation and the Federal Reserve, we could see bearish sentiment once again enter the markets.
This will be especially detrimental to high-growth names like MVIS stock. However, once ADAS becomes a more common feature in standard automobiles a partnership could represent millions of LiDAR unit volumes in the near future.
I believe MVIS stock has plenty of potential but only for investors willing to stomach the ride.
On the date of publication, Joseph Nograles 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.
Joseph Nograles is a part-time freelance copywriter focused on the financial industry. He has worked in a wide variety of industries from tech to consulting with one of the “big four.” He has always enjoyed analyzing businesses and has been a CFA charterholder for nearly a decade now.
