Investors who chose to get on board with MicroVision (NASDAQ:MVIS) stock now would be making an unwise decision.
There are ample reasons to be bearish on MicroVision moving forward. Despite having said that, the upside down dynamics of today’s market mean that it could stagnate at its current overvalued price, or even rise.
That’s a good place to start.
Reddit Fan Favorite
MVIS stock is often talked about on the Reddit forum r/WallStreetBets, which is enough these days to keep fundamentally weak equities afloat.
This has occurred multiple times this year and continues to keep shares well above where they might otherwise be in normal times. The fact is that MicroVision shares are heavily shorted with current short interest sitting at 21.5%. This is serving to prop prices up.
If the Redditors are correct, they can affect a short squeeze causing prices to spike making these highly speculative investors massive returns very quickly.
The more conservative school of thought is that now is a good time to take some profits off the table for those who established positions months earlier.
That would be my suggestion. But, I realize that Redditors and Robinhood investors are prone to holding, or perhaps it’s holding as well as unified action. Even so, there are multiple signs that point to a bearish position on MVIS being a prudent one.
So, why should investors be bearish on MVIS right now?
MicroVision Isn’t Living Up to Its Promise
Back in February, MicroVision released news that precipitated the run up in its share price. On Feb. 10 it announced that it was making progress on its light-detection-and-ranging (lidar) technology. Within the span of a week it had gone from about $7 to above $23.
The company also announced that it would likely be able to produce a working prototype of its long-range lidar technology by April, which disappointed.
But despite nearly non-existent sales, it managed only $479,000 in the first quarter, MicroVision remains a darling of the Redditor crowd.
That’s partly because the promise of lidar largely hinges upon the fate of Tesla (NASDAQ:TSLA). Tesla has famously been a staunch proponent of computer vision in its vehicles rather than lidar. But recent events indicated that lidar could indeed be the way forward as EV autonomy evolves.
Tesla
A Tesla was photographed a few months ago in Florida sporting lidar sensors from Luminar (NASDAQ:LAZR). Tesla did not indicate that the partnership means its computer vision aspirations are over. Rather, it called the partnership useful for the purpose of “testing and developing.”
For MicroVision, this could have been interpreted multiple ways. On the one hand, it clearly indicates that lidar has a future in vehicle autonomy as many pundits have long suspected. However, Tesla’s choice of Luminar as a partner indicates MicroVision is likely not the leader in the field many expected it to become.
In fact, it’s much closer to a company that should trade in penny stock territory than one deserving of a $22 share price and $3.2 billion in market capitalization.
The two analysts covering MVIS stock each give it a shockingly low price target of 25 cents. That’s more than 80x where it currently trades at.
It’s one example of what happens when the internet amplifies the attractiveness of an object that should appear much less shiny.
The Bottom Line on MVIS Stock
Even though Reddit will prop MVIS stock up for now, I suspect MicroVision is simply going to continue what it has done throughout its corporate life. That is, pivot and attempt to commercialize a new technology.
It did raise nearly $49 million through an at-the-market sale of common stock when it popped in February. And it does have $75 million in free cash according to its 10-Q. It has also flat out stated that it is looking to be purchased or could merge.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.