MicroVision stock is a high-risk bet for long-term investors given its steep valuation, current cash burn rates, and widening losses
Nov. 25, 2021
MicroVision (NASDAQ: MVIS) is a company that operates in the autonomous vehicle space and is valued at a market cap of $1.23 billion. It develops lidar sensors used in automotive safety as well as autonomous driving applications. Additionally, it also develops micro-display concepts and designs for augmented reality headsets.
Let's see if MicroVision stock is a good investment at current valuations.
The bull case for MicroVision
A report from Research Dive estimates the global automotive LiDAR sensor market to touch $2.43 billion in 2026, up from just $152 million in 2018, indicating an annual growth rate of 39% in this period. A rapidly expanding addressable market will allow MicroVision to grow its revenue robustly in the upcoming decade.
MicroVision's microdisplay engine provides a critical component for augmented reality head-mounted displays. Further, its short-range lidar turns any surface into a virtual touch screen.
The company's mid-range lidar module provides concepts in several verticals such as home automation, security, and robotics.
We can see that MicroVision is well poised to disrupt several verticals given its suite of high-tech products and solutions.
The bear case for MicroVision
MicroVision gained popularity this year due to its status as a meme stock. MVIS stock rose from $0.18 in March 2020 to $21.6 in June 2021. Its currently trading at $7.17 and is down almost 80% from 52-week highs.
In Q3 of 2021, MicroVision reported revenue of $718,000 compared to $639,000 in the year-ago period. However, it reported a loss of $9.3 million or $0.06 per share in the quarter. Its top-line increased by 12% year over year, and operating expenses rose by over 200% year over year to $10.8 million. MicroVision reported a net loss of $2.82 million or $0.02 per share in the year-ago period.
Further, MicroVision's operating cash flow stood at a negative $10 million in Q3. The company ended the quarter with $125 million in cash, suggesting it will have to raise capital soon, given high cash burn rates.
Analysts tracking MVIS stock expect sales to fall by 19.4% to $2.5 million in fiscal 2021 and then rise by 175% to $6.85 million in 2022. But investors should note that MicroVision sales stood at $17.6 million in 2018 and have declined at an alarming rate in the last two years.
It suggests MicroVision is valued at a forward price to 2022 sales multiple of 170x, which is sky-high. The company is expected to remain unprofitable, and its adjusted loss per share is forecast to widen from $0.1 per share in 2020 to $0.35 per share in 2022. Given its outstanding share count of 164 million, losses might rise to $57 million next year.
So, should I buy MicroVision stock?
MicroVision has to ensure it bags multiple deals over time, given the rising competition in this space, to gain investor confidence. Additionally, MVIS CEO Sumit Sharma warned investors that meaningful sales are more than three years away, making the stock an extremely high-risk bet at current valuations.
Quickfire round
Is MVIS overvalued?
Yes, MVIS stock seems overvalued at its current price
Does MVIS stock pay dividends?
No, MVIS stock does not pay dividends
Is MVIS a meme stock?
Yes, MicroVision has gained popularity as a meme stock
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