MicroVision May Be Disruptive, But Don’t Buy MVIS Stock Yet

In some ways, MicroVision (NASDAQ:MVIS) stock reminds me of GameStop (NYSE:GME). But, unlike many other stock pundits,  I don’t think that the companies, whose shares have both been lifted by Reddit users,  are complete “losers.”

Instead, I think that both names have great potential.  I also believe, though, that both of their stocks are dramatically overvalued and that investors will have many opportunities to buy their shares at much lower prices.

Microvision’s Potentially Revolutionary Product

However, while GameStop is basically a conventional e-commerce/brick-and-mortar retail play, Microvision is potentially disruptive and revolutionary.

Speaking on the company’s recent first-quarter earnings conference call, MicroVision’s CEO, Sumit Sharma, said that the lidar sensor that the company will soon unveil “could offer a much higher level of performance, compared to any lidar currently available or announced in the market.” The CEO expects the product to be launched in the second half of 2021.

Moreover, Sharma was quite specific about why its lidar laser, called A-Sample,  will be superior to competing sensors. One reason is that A-Sample’s readings of “position” and  “axial, lateral, and vertical components of velocity” are updated “30 times per second,” more than any other lidar system, according to the CEO.  As a result, it enables “better predictions at a higher statistical confidence, compared to other sensor technologies,” Sharma stated.

This increased precision, in turn, will enable autonomous vehicles to more accurately predict the future locations of other nearby moving vehicles, thereby reducing the chances of collisions, the CEO explained.

Further, A-Sample collects more coordinates per area than any other “single-channel sensor  on the market,” the CEO reported. Finally, but very importantly,  the “sensor  has also been designed for immunity to interference from sunlight and other lidar sensors using our proprietary scan locking intellectual property,” Sharma said. I’ve previously  read that, for lidar systems,  interference from their peers is a major problem.

I’m not very familiar with lidar technology. But it’s clear to me that A-Sample has a good chance of being disruptive in the lidar space.

And although I could not find any corroboration of Sharma’s assertions by analysts or experts, I did not come across any refutations of his points by them either.

MicroVision Stock Looks Overvalued at This Point

In the wake of its embrace by Reddit users, MVIS stock is trading at a trailing price-sales ratio of 986, while its market capitalization is $2.25 billion, according to Yahoo Finance. I believe that’s the highest P/S ratio I’ve ever heard, and the market capitalization is excessive for a company whose value is largely based on potential.

Given these points and the market’s current aversion to growth names in the tech sector, I expect the stock to decline in the short-to-medium term.

Other Potential Positive Catalysts

According to Seeking Alpha, Microvision “is reportedly a supplier for” Microsoft’s (NASDAQ:MSFT) Hololens 2 “mixed reality headset,” and the Army recently agreed to spend “up to” $22 billion on Hololens.  As a result, Microsoft’s deal could prove to be a huge moneymaker for Microvision.

What’s more, in August Sharma said that a number of companies were looking into acquiring MicroVision and last month, the company altered a “change in control provision” that affected Sharma, Seeking Alpha reported. Given these points and the strong potential of the company’s upcoming lidar sensor, I believe that MicroVision could easily become a takeover target within the next year.

The Bottom Line on MVIS Stock

MicroVision’s lidar sensor sounds like it could be revolutionary, although its attractiveness to potential buyers could be limited if it is very expensive. Meanwhile MVIS stock could get a big boost in the wake of Microsoft’s deal with the Army and the company could easily become a takeover target.

But given MicroVision’s stratospheric valuation and the mood of investors towards growth and tech names, I recommend waiting for a further pullback in MVIS stock before taking a bullish position in the name.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Larry has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, Plug Power, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.