High-performance automotive lidar (light detection and radar) sensor company MicroVision (NASDAQ:MVIS) has received a lot of attention from meme-stock traders lately. Yet, that’s not a sufficient reason to invest in MicroVision now. MVIS stock appears to be running out of steam, and the next big move is probably to the downside.
The last thing I want is for anyone to be on the wrong side of the trade during a stock’s pop and drop. MicroVision is still trending in social media, but the hype phase is fading fast and as the old saying goes, “Stairs up, elevator down.”
MVIS Stock Popped But Is Now Starting to Drop
It’s a classic spike-and-fade move for MVIS stock, as it jumped from $2 to $8 recently but then pulled back to $6. Clearly, this is an instance of “sell the rip,” not “buy the dip.”
Just to recap, MicroVision develops lidar technology for advanced driver assistance systems (ADAS), as well as for industrial applications including robots and even smart infrastructure. So, there’s an artificial intelligence (AI) angle here, but it’s very indirect.
That slight AI connection may have been enough to prompt a massive short squeeze in MVIS stock. Furthermore, the cost for short-sellers to borrow MicroVision shares surged. At one point, there weren’t any MicroVision shares available to short-sell at all at particular brokerages.
These ingredients, I believe, combined in a way that catalyzed a frenetic rally. However, the buying activity has subsided and the MicroVision share price has declined. We’ve seen this movie before with GameStop (NYSE:GME) and Bed Bath & Beyond (OTCMKTS:BBBYQ), so don’t expect a happy ending.
MicroVision Is in a Terrible Financial Mess
Maybe you’re not interested in short squeezes and just want to invest in MicroVision because you’re bullish on lidar technology. Before you jump into a hasty trade, though, be sure to look closely at MicroVision’s financials.
Larry Ramer concisely summed up the state MicroVision’s of financials last year:
“In all of 2022, however, Microvision generated just $700,000 in sales, down from $2.5 million in 2021 and $3.1 million in 2020. In 2022, it reported an operating loss of $61.4 million versus an operating loss of $53.9 million in 2021.”
What about this year, though? So far, it appears that MicroVision isn’t off to a stellar start. In 2023’s first quarter, the company’s total operating expenses grew to $21.43 million, compared to $13.47 million in the year-earlier quarter. Surely, this contributed to MicroVision’s Q1 2023 earnings loss of 11 cents per share. That loss, unfortunately, is deeper than the company’s year-earlier quarter’s loss of 8 cents per share.
On top of that, MicroVision has a dwindling capital position. Specifically, the company’s balance of cash, cash equivalents and restricted cash was cut in half, from $56.7 million at the end of 2022’s first quarter to $27.41 million at the end of Q1 2023.
MVIS Stock: Danger Ahead
MicroVision’s fundamentals aren’t encouraging, to say the least. The company has a widening net earnings loss and a subpar balance sheet. Yet, some folks will still get caught up in the hype surrounding MicroVision.
That’s a dangerous game to play. MicroVision gained favor among short-term traders based on short-squeeze fervor and possibly AI hype. Now, MVIS stock is liable to fall faster than it ascended. Therefore, it’s wise to stay out of the trade altogether, even if you’re optimistic about the lidar industry in general.
On the date of publication, David Moadel 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.
