Microvision (NASDAQ:MVIS) stock may still be down from the high prices it hit during the “meme stock” waves earlier this year. Yet is it time to "buy the dip" with this lidar play? Not so fast.
Why not? First, Microvision has yet to demonstrate that it's set to join the ranks of Luminar Technologies (LAZR) and Velodyne Lidar (VLDR). Both of these competing lidar companies have made greater progress in monetizing this technology.
Second, its popularity as a meme play continues to fade. With little backing its valuation but hope and hype, shares stand to experience big declines, once the speculators still holding it throw in the towel.
With more pointing to it falling back to its pre-meme prices, rather than bouncing back to its prior high, I’m bearish on the stock. (See Microvision stock charts on TipRanks)
MVIS Stock and its Lidar Prospects
With its usage in self-driving vehicle systems, lidar, or laser radar, is a technology set to explode over the next few years. Microvision may be smart in pivoting to this market. The problem?
Unlike more established names in this fast-growing industry, like Luminar and Velodyne, this company still needs to demonstrate that it can turn its ambitions into tangible financial results. Both of these rivals are already generating millions in revenue. This company? It has yet to generate any revenue from its lidar endeavors.
Both of its competitors also have also established partnerships with leading automakers. Microvision? It’s yet to achieve this either. Given how far behind this company has fallen, its potential of finding success in this area, much less becoming a competitor to either Luminar or Velodyne, is debatable.
That’s what makes the current valuation of MVIS stock appear unsustainable, even after its pullback from as much as $28 per share, to around $15 per share today. Admittedly, there’s been a factor independent of its fundamentals that’s enabled its share price to see a tremendous increase in value. But as that factor continues to wane, chances are this stock will see further moves to lower prices.
Microvision’s Fading Meme Appeal Points to Further Declines
The valuation of MVIS stock is completely out of line with its underlying value. That's clear from its market capitalization of around $2.4 billion, against just $2.26 million in trailing twelve month revenue.
Of course, it’s not its fundamentals that enabled Microvision to reach the price levels it’s hit this year. It wasn't even really its lidar prospects themselves. So, what drove its turbo-charged move from mid single-digits, to the high twenties per share? Its status as a short-squeeze target of the meme trading community.
The issue now is that this meme popularity has long since peaked. Short interest has also come down. This reduces the chances that it will experience the “squeeze,” touted so widely on Reddit and other platforms. As meme speculation continues to dwindle, and more people on the short side cover their positions, the spread between its trading price and underlying value will continue to narrow.
Secondary offerings have enabled Microvision to increase its cash position. Some may see this as something that could minimize declines once the meme investing trend stops being a factor. But this amount ($135.3 million) represents just 5.6% of its current market capitalization. That’s not to say the stock is at risk of falling more than 95%, down to a value on par with its war chest. Yet a high double-digit decline may still be possible, given the difficulty of assigning a value to its work-in-progress lidar business.
TipRanks Smart Score
MVIS stock has a TipRanks Smart Score of 6 out of 10 (Neutral). Sentiment among TipRanks Investors comes in at Very Negative. Blogger Opinions have been Bearish. Technicals are Positive, and Hedge Fund Activity has Increased in the past quarter.
Bottom Line: Investors could Skip this Lidar Play
It’s going to be years until lidar reaches critical mass. This makes even Microvision’s more established competitors, Luminar and Velodyne, risky plays themselves. In fact, both stocks have experienced big declines in recent months, as the market realizes the “pay off” for either one remains years in the making.
However, it’s more of a gamble here with MVIS stock. Only holding on due to what remains of its “meme stock” status, which is fading fast, investors could consider this a lidar play to skip out on.
Disclosure: At the time of publication, Thomas Niel did not have a position in any of the securities mentioned in this article.
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