Light detection and ranging (LiDAR) is becoming a key emerging technology. As society progresses toward self-driving cars, it’s pivotal that these vehicles have cutting-edge sensory capabilities. Investor interest in LiDAR plays like Luminar (NASDAQ:LAZR), Velodyne Lidar (NASDAQ:VLDR) and MicroVision (NASDAQ:MVIS) stock have gained considerably as a result.
MVIS stock, for example, is up from $2 to $15 since December. It’s been an incredible run.
However, it’s far from clear that all these LiDAR companies have equal prospects. In fact, as I’ll argue, MicroVision is a far less promising opportunity than, say, Luminar.
MVIS stock has benefited from a rising tide so far. When investors take a closer look at fundamentals, though, I expect MicroVision to slump compared with its peers.
A Closer Look at MVIS Stock
If MVIS stock were the only way to gain exposure to LiDAR, the current trading frenzy might make sense. When there is scarcity, you can justify a premium valuation.
However, MicroVision is hardly the only — or best — way to get exposure to LiDAR. Thanks to the special purpose acquisition company (SPAC) boom, there are in fact numerous publicly-traded LiDAR companies now.
Another important point here is that MicroVision has a relatively small research & development budget — generally in the $10-$20 million range annually.
Plus, MicroVision has multiple irons in the fire, not all of that R&D spend is necessarily going to LiDAR. Rivals such as Luminar spend considerably more than this on research and seem to be more laser-focused on LiDAR commercialization in particular.
MicroVision’s LiDAR Technology Is Unproven
MicroVision has highlighted its potential LiDAR technology capabilities in recent quarters. However, prior to 2020, the company didn’t discuss LiDAR nearly as much. It appears that MicroVision has worked on various sensing technologies over the years and is now trying to pivot to LiDAR.
To that end, it put up a demonstration video on Youtube last summer showing what it imagines a potential MicroVision LiDAR system might be able to do in the future. The video looks good — it’s a fine piece of marketing material. Watch through to the end, though, and you hit this disclaimer from the company’s official video:
This video demonstrates expected capabilities of an automotive lidar module being developed […] MicroVision has not announced commercial availability of its automotive lidar module and final capabilities and performance specifications may vary from those demonstrated in the video.
Look back through MicroVision’s Youtube account history, and you’ll see that it has been publishing many such intriguing videos over the years. Yet, year after year, the company generates next to no revenues even with all its cool concepts.
Until proven otherwise, investors must be aware that there’s a decent chance MicroVision’s LiDAR will face a similar fate. Meanwhile, some competitors in the LiDAR space already have available products, revenues and top-notch automotive industry partners.
Dilution Is Crushing Shareholders
Over the past decade, MicroVision has never generated more than $20 million in annual revenues. It often brings in less than $10 million in any given year.
While MicroVision has struggled to generate revenues, it has carried on its business nonetheless. In order to do so, it has funded itself with epic levels of dilution.
Over the past decade, the share count has jumped from 12 million to more than 140 million MVIS stock shares outstanding now. That’s dilution of more than 90% of a stockholder’s ownership position a decade ago.
Given that bloated share count, MicroVision’s market capitalization has soared. In fact, the market cap has now topped $2.5 billion. That’s simply tremendous for a company that has no real history of substantial revenues, profits, or demonstrated technological success.
I get taking a flyer on this sort of thing at a reasonable valuation, but at $2.5 billion of market cap, you need more than a cool story to justify the stock price.
MVIS Stock Verdict
LiDAR is a compelling investing trend. There’s no reason to argue on that point. Given the way auto technology is progressing, some LiDAR developer is likely to be a big winner going forward.
However, the odds of that winner being MicroVision are far smaller. With numerous other well-respected and funded companies coming to market, Microvision has to prove it belongs in the conversation.
So far, it’s failed to do that. This could change, of course, however, there’s still no reason to think Microvision is likely to be the leader in Lidar going forward. I’d much rather own a peer such as Luminar.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.
