What does Microvision do?

Microvision is developing a LiDAR sensor for self-driving cars. This futuristic technology uses artificial intelligence (AI) and machine learning to ensure safety. It’s vital in avoiding collisions in autonomous driving. Furthermore, Microvision’s technology can adapt for use in augmented reality, interactive displays, and consumer LiDARs. For instance, a consumer can interact with a projected image, as it behaves like a touchscreen.

Revenue streams and competitive advantage

In recent years, the company has made money from selling AR displays, components and LiDARs that manufacturers can incorporate into their products. This hasn’t been producing meaningful revenue, so it’s now considering selling a part of the company or merging.

Meanwhile, it’s focusing on completing its first generation LRL module to scale in the automotive LiDAR market. It hopes to have this ready for sale later this year. This technology is claimed to be immune to interference signals from other LiDARs, rogue malicious signals and interference caused by sunlight. This suggests Microvision has a competitive advantage.

Nevertheless, competition is rife. Competitors include Velodyne, Luminar Technologies, Texas Instruments, Intel, Bosch, Pioneer, Sony (LCOS) and several more.

The company also has the potential to make money from selling its automotive LiDAR sensors to tech companies using a Mobility as a Service (MaaS) model.

Microvision bulls vs bears

The bullish case for Microvision is simple. The LiDAR technology created by it is reportedly smaller in size and cheaper than competitor offerings. Smaller is better when it comes to tech components, and cheaper is always better for buyers. In theory, it could level the playing field in autonomous car manufacturing if Microvision can pull this off and scale it. Of course, that’s easier said than done and there are no guarantees.

However, one notable user of its technology is reportedly Microsoft. The software giant won a $22bn contract with the US army to provide its HoloLens 2 mixed reality product to soldiers. The rumour that Microvision is a supplier for this tech was another reason for its recent share price rally.

Machine learning, AI and AR are all hot sectors for growth investors. But they’re still in the early stages of development with a lot to prove. The arguments for how this technology will change the world are compelling. But much of it is theoretical and therefore a gamble.

Microvision owns 55 patents with over 90 pending patents. But it also knows of several competitors that may challenge its patents, which could lead to costly legal battles.

Reading through the company’s 10-K shows a seemingly endless list of potential shareholder risks. It’s not pretty. The company is fully funded for the next 12 months. But has never been profitable (since 1993!) and will continue to incur significant losses this year. Therefore, this is a highly speculative investment. I’m not tempted to add Microvision shares to my portfolio.

Is this a growth stock I should buy for my portfolio? Let’s take a look at the investment case.

MicroVision: business description

MicroVision is a US company that develops laser scanning technology. Its laser technology has applications in areas such as 3D sensing (autonomous vehicles), interactive displays, and projected displays. Currently, the company has a market capitalisation of around $2.8bn.

Autonomous vehicle potential

One reason investors are excited about MicroVision is that the company recently announced it had completed the development of its long-range lidar sensor A-Sample hardware and development platform.

MicroVision believes its high-performance lidar sensor – which has an expected range of 250 meters and a field of view of 100 degrees horizontal by 30 degrees vertical – has the potential to advance autonomous driving and active safety systems. It says that a version of this lidar sensor could be available for sale, in initial quantities, in the third or fourth quarter of 2021.

Q1 results

After MicroVision’s share price spiked last week, it has pulled back this week on the back of the company’s first-quarter results. These results were not fantastic.

For the first quarter of 2021, revenue was $0.5m, compared to $1.5m in Q1 2020. Meanwhile, the company’s net loss for the period was $6.2m, or $0.04 per share, compared to a net loss of $4.9m, or $0.04 per share, for the first quarter of 2020.

On the positive side, the company said that it ended the quarter with $75.3m in cash, and cash equivalents, compared to $16.9m at the end of 2020.

Is MicroVision the next GameStop?

As for whether MVIS is the next GameStop (GME stock is up about 930% year to date after a massive short squeeze), I don’t think it’s likely to see the same kind of gains.

The reason GameStop had such a big short squeeze earlier in the year was that short interest was extremely high. In January, approximately 140% of GME’s public float had been sold short.

MVIS doesn’t have anywhere near the same level of short interest. According to 2iQ Research, which uses short-selling data from Astec, MicroVision’s short interest is currently around 25%. That level of short interest could result in a significant short squeeze. However, I don’t think it would be on the same level as the GME short squeeze.

Should I buy MVIS stock?

While MicroVision appears to have interesting technology, it’s not a stock I’d buy for my own portfolio. One reason is that it’s very much a speculative stock. Revenues are small and the company is generating losses.

Another reason is that the company’s valuation is very high. The market-cap of $2.8bn looks excessive, to my mind, given current revenues.

All things considered, I think there are much better stocks I could buy.