Is MicroVision a Winner in the Lidar Industry? With the increasing use of lidar technology in the automotive industry, MicroVision (MVIS) could scale its business significantly in the coming months...

With the increasing use of lidar technology in the automotive industry, MicroVision (MVIS) could scale its business significantly in the coming months. However, can the stock continue to gain, relying on the company's pedestrian fundamentals? Let's find out.

MicroVision, Inc. (MVIS), which has been operating for more than 25 years, builds automotive lidar products based on its proprietary micro-electromechanical system (MEMS) solid-state technology. The stock has gained 211.3% in the first half of this year, due in-part to its announcement in April 2021 that it had completed the development of the A-Sample hardware and development platform of its long-range lidar sensor. However, the stock's price soared primarily due to Redditors' interest in it. MVIS is based in Redmond, Wash.

MVIS has lost 39.9% since hitting its 52-week high of $28 on April 27, to close yesterday's trading session at $15.90. Moreover, MVIS' net loss increased 549.4% year-over-year to $14.96 million for the second quarter ended June 30, 2021, while its loss per share came in at $0.09, up 350% year-over-year.

According to a Global Market Insights report, the lidar market is expected to grow at a 20% CAGR between 2021 - 2027. However, MVIS' near-term prospects look bleak because it could take significant time for it to successfully market its lidar technology.

Here's what we think could shape MVIS' performance in the near term:

Caught Up in Meme Stock Craze

Short-seller Hindenburg Research had issued a report against MVIS in December last year, calling it a "corporate husk with almost no revenue or intellectual property value." Consequently, subreddit r/wallstreetbets took an interest in the stock, causing its price to soar earlier this year. The stock has gained 183.5% through the first four months, hitting a peak of $24.18 in mid-February and ultimately hitting its 52-week high of $28 on April 27, 2021. However, the stock has since plunged and continues to exhibit significant volatility.

Raising Capital through ATM

On June 21, MVIS announced that it had inked a$140 million At-the-Market (ATM) equity offering agreement with Craig-Hallum Capital Group. The company is expected to use the net proceeds for general corporate purposes, working capital, and capital expenditures. It also completed a $50 million ATM offering with Craig-Hallum in February 2021 and a $13 million ATM offering in December 2020. However, as with any such offering, the additional shares issued could dilute earnings for the existing shareholders.

Unfavorable Analyst Estimates

Analysts expect MVIS' revenue to increase 34.3% year-over-year to $4.15 million in its fiscal year 2021. However, the company's EPS is expected to decline 100% for the quarter ending September 30, 2021, and 70% in its fiscal year 2021. Furthermore , Wall Street analysts expect the stock to hit $0.25 in the near term, which indicates a potential 98.4% decline.

POWR Ratings Reflect Bleak Prospects

MVIS has an overall F rating, which equates to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. MVIS has a D grade for Growth, which is consistent with analysts' expectation that its EPS will decline in the coming quarters. It has an F grade for Sentiment, which is in sync with unfavorable analyst sentiment.

The stock has a D grade for Quality. This is justified given MVIS' negative values for trailing-12-month ROCE, ROTC, and ROTA, respectively, compared to the 8.31%, 4.83%, and 3.64% industry averages.

MVIS has an F grade for Value, which is consistent with its forward EV/S and P/S of 635.78x and 692.33x, respectively, which is significantly higher than the 4.07x and 4.01x industry averages. Also, it has an F grade for Stability, which is in sync with its 3.94 beta.

MVIS is ranked #46 of 47 stocks in the B-rated Technology – Electronics industry. Beyond what we've stated above, we've also given the MVIS grade for Momentum. Click here to get all the MVIS ratings.

If one is looking for top-rated stocks in the same industry with an Overall POWR Rating of Strong Buy or Buy, one can access them here.

Bottom Line

MVIS generated significant returns earlier this year due primarily to the Redditors' interest in it. However, as the social media hype regarding the stock continues to wane, it could witness a further decline. Therefore, we think the stock is best avoided now.

MVIS shares rose $0.14 (+0.88%) in premarket trading Tuesday. Year-to-date, MVIS has gained 196.47%, versus a 19.10% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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