Heavily overvalued Microvision stock is worse than a bet
MicroVision is still on sale, just like the CEO said and the latest 10-Q report indicates. Unfortunately, there are still no buyers.
For some reason, the market believes a deal will happen when the stock has a market value of $ 3.41 billion. Let me provide an obviously necessary reality check: MVIS’s stock is not worth that much.
In fact, as I pointed out in my last post on May 10, Microvision is worth half of its $ 2.2 billion market value at the time. Today, MVIS stock has a totally unsustainable market value of $ 3.41 billion.
MicroVision will not sell for this price
On the one hand, its sales in the last quarter were $ 479,000. None of this came from product sales, mostly royalty income.
Second, the business burns its cash. It generated negative free cash flow (FCF) of $ 5 million, as evidenced by its Statement of cash flows (page 5 of its last 10-Q report). Considering he has $ 75 million in cash, maybe this could go on for a while.
However, if MicroVision is to start production of its latest lidar products, it may not have the funds to ramp up production. The company said that after the next 12 months, “we may need additional capital to fund our operating plan beyond this period.” He did not say exactly what that entails. But to reach the production of 12,000 to 15,000 sensors by the end of 2022, this will require significant working capital.
As a result, the company claims to have changed its business strategy. This is what the latest 10-Q states on page 19:
“Accordingly, we plan to focus our near-term attention on strategic alternatives, including a sale or potential merger of the Company, the sale of part of the Company, a strategic minority investment, as well as licensing and other transactions. “
A third reason is that his compositions are cheaper. For example, Lidar Velodyne (NASDAQ:VLDR) has similar product and expected sales of $ 85 million this year. But its market capitalization is only $ 2.1 billion.
Go on then. It is simply impossible for a strategic buyer to pay a premium of more than 60% for a company that has no sales in the same industry.
That really doesn’t leave the MVIS stock in an enviable position, especially given its rise over the past month.
What to do with MVIS Stock
According to In search of the alpha, There’s only 2 analysts who cover the MVIS share. Their average price target is $ 3.00. Compare that with its price today (June 15) of $ 20.42. You get the point. No one on Wall Street believes in this dizzying valuation.
The point is, in every way, this stock looks super overvalued. An analyst in In search of the alpha wrote that as a favorite of WallStreetBets, MVIS stock could have some value at Microsoft (NASDAQ:MSFT). Microsoft uses MicroVision technology in its augmented reality lenses for its HoloLens 2.
But let’s be realistic here. Why hasn’t Microsoft bid on MicroVision yet? If he’s so enamored with the company’s technology and knows the business is for sale, why hasn’t there already been an offer? And why would they now pay 60% more than they could have paid just a few months ago?
The setup does not look good for the stock MVIS. My logic could be wrong though. Maybe the reason MIVIS stock is on the rise is because Microsoft is really considering buying the stock.
This implies that insiders have leaked the news and raised the price. But it’s a very weak reed to lean on. He does not resist logic and prudence. You cannot buy MVIS at this price based on this reasoning. Microvision is more speculative than pure gambling.
As of the publication date, Mark R. Hake does not hold any titles mentioned in the article. The views expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.