MicroVision Is Only a Speculative Play After Another Torrid Quarter

Autonomous-driving tech company MicroVision (NASDAQ:MVIS) had been a darling of the Reddit trading crowd. However, the enthusiasm surrounding the stock was short-lived as MVIS stock has shed more than 45% of its value since May this year.

MVIS stock: Concept image of a self-driving car lidar system.
Source: temp-64GTX/Shutterstock.com

Most recently, the stock took a massive hit from posting disappointing earnings around the end of October. Moreover, significant revenue is still years away, and with the rising competition in the sector, MVIS stock is more of a speculative play.

MicroVision has been in the game for a significant time, and the journey hasn’t been easy. It has incurred colossal losses due to the insufficient demand for its core products. However, the consensus is that the development of automotive LiDAR sensors can effectively turn things around for the company. At this stage, though, MicroVision is a long way from achieving its objectives and achieving profitability.

Another Tough Quarter

MicroVision recently reported a whopping net loss of $9.4 million, with a negative operating cash flow of $10 million at the end of the third quarter. Moreover, it reported revenues of $718,000, a 12% improvement from the prior-year period.

The company continues to burn through a massive amount of cash without a source of incoming revenues. Investors are hopeful that it becomes the leading LiDAR systems provider for autonomous vehicles, but things look dreary with no firm deals in place and plenty of competition.

It appears that the path for significant revenue gains and profits is incredibly murky. CEO Sumit Sharma indicated that the company wouldn’t generate substantial sales for at least the next four years. Surprisingly, during the quarter, he remarked that requesting additional information about the company was a major win.

Nevertheless, despite the weak operating performance, the management is ecstatic about the future. Mr. Sharma states that, “No lidar company has yet secured an OEM deal that is recorded on its financial statements as meaningful backlog. I believe MicroVision is ahead of all our
competitors in several key areas.” Furthermore, he also believes that the next 16 months will be critical, as several original equipment manufacturers (OEMs) may partner with the company is launching their new EV models.

Outlook

Analysts estimate that the MicroVision could generate over $70 million by 2030. Much of its sales growth will be led by automotive LiDAR sales. The cost of sales will be linked to the sale of the company’s long-range LiDAR (LRL) sensors. Moreover, as production starts to ramp up next year after validation testing, gross margins may turn positive.

Moreover, as the company achieves scale, its gross margins will stabilize over 50% by 2026.  However, operational expenses are likely to outpace revenues through 2027 to support production ramp-up. Additionally, the company will be generating profits after 2029.

Hence, it’s a long wait before MicroVision will be in the green regarding profitability. Its competition, including Luminar Technologies (NASDAQ:LAZR) and Velodyne Lidar (NASDAQ:VLDR), are also in their early stages of production — but could pose a serious threat down the road. Therefore, there are a lot of ifs and buts at this stage which limits MVIS stock’s attractiveness.

Bottomline On MVIS Stock

MicroVision hopes to establish a strong presence in the promising automotive LiDAR market. Though, as its recent results suggest, it is still years away from achieving its goals. Those who believe in its long-term case should wait for a better entry point, as its currently trading at a price-to-sales ratio of over 470 times. However, at this point, it’s more of a speculative play that is ideal for short-term gains.

On the date of publication, Muslim 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

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.  


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