One of the lidar industry’s most controversial players, Microvision (NASDAQ:MVIS) reported Q3 earnings last night. Microvision, a veteran in laser beam scanning technology, is one of almost a dozen companies vying for a share of the automotive lidar market. Its position as a leader in this scorching-hot space has helped propel MVIS stock 72% year-to-date. But did the Q3 report indicate more or less hope ahead for the lidar company?
Let’s take a closer look at the results. But first, here’s a bit of context heading into yesterday’s report.
Earlier this month, my conversation with MVIS CEO Sumit Sharma had me feeling James Bond vibes. It made me think that, possibly, Bond himself would drive a vehicle decked out with lidar.
Admittedly, I was revved up.
But after listening to Microvision’s Q3 earnings call, I’m feeling something more akin to the iconic Roy Batty monologue in Ridley Scott’s 1982 dystopian science fiction film Blade Runner: “All those moments will be lost in time, like tears in rain. Time to die.” Put another way, Microvision’s Q3 earnings call was more death soliloquy than lidar victory.
Like Blade Runner’s Batty, investors were left feeling rage and grief and existential torment. But while the Nexus-6 “replicant” Batty is a dystopian shell devoid of genuine human emotion, that certainly is not the case for MVIS investors. MVIS stock ran up almost 9% on high hopes. Today, a weak print, revised strategic commentary and energized short sellers (19% of float) will hit MVIS stock hard. Shares are already trading down over 20% after hours. Reddit posts nicely capture investor sentiment.
“I am either going to be very rich or very poor long term. Short term = poor,” one user wrote. Another quipped “short term: dannnnnnnnnnggggggg medium term: dang dang dang…. long term: DANNNNNGGGGGGGGG.!
These comments embody the sad reality that retail-investors sometimes face. This is, long-oriented holders can sometimes overlook a sloppy quarter … if there’s something good to look forward to. Unfortunately, Sharma told investors that the lidar market isn’t a revenue story until 2025. So, there’s no reason to buy the stock right now.
My view has always been that Microvision has as legitimate a shot as any other player in the space. And that view hasn’t really changed. But with no near-term gratification, there’s no rush to jump into this stock. Like Batty, rain-drenched and battered, I’d call MVIS stock dead money for now.
Here’s why I’ve reached that glum conclusion.
MVIS Stock: Shorts Will Have Their Day
If you’re on the short side of MVIS stock, congratulations. You’ve bet on the company to fail and you’re probably cashing in your chips right now. But, if you’re long, you’re probably in this stock because you think Microvision has the potential to capture a piece of the automotive lidar market.
We all know that lidar isn’t a market that’s going to happen overnight. Still, quarterly results do matter, so let’s get the gory details out of the way. Microvision’s earning loss of 6 cents missed consensus by 2 cents. Q3 sales of $718,000 — already meager to begin with — also sadly moved in the wrong direction, down about 4% sequentially. Oh, and don’t forget that none of those sales are lidar sales.
OK, so it’s a sloppy print.
But as I mentioned before, long-term investors can forgive a sloppy earnings print if there’s visibility into a fundamentally sound path in the lidar business. For MVIS bulls, hopes have been running high since the company launched its A-sample hardware in April. And just last month, Microvision debuted its family of lidar sensors at the Munich mobility show. Buzz from the show (and from the field) on the company’s long-range automotive lidar (which claims an industry leading range of up to 250-meters) has been very encouraging.
How Soon Is Now?
What investors really need from Microvision is visibility into some revenue-generating lidar contracts. After all, lidar competitors Luminar (NASDAQ:LAZR) and Innoviz (NASDAQ:INVZ) have been bragging about relationships with big automakers like Volvo (OTCMKTS:VLVLY) and BMW (OTCMKTS:BMWYY). They’ve also bragged about billion-dollar order books (whatever that means). Luminar in particular has been swirling in speculation that its tech could be used at electric vehicle (EV) startup Lucid Group (NASDAQ:LCID) and even EV giant Tesla (NASDAQ:TSLA). (Do keep in mind, however, that none of this is confirmed).
All this deal-related brouhaha has investors understandably worried that Microvision has missed the boat. When I spoke to Sharma a few weeks ago, the lidar CEO assuaged investor fears, boldly stating that none of these announced automotive lidar relationships are “locked up.” He also asserted that there’s plenty of room for Microvision to capture share.
In fact, when discussing the level of engagement with automakers, Sharma indicated he’s feeling “more confident than ever” about the company’s prospects.
OEM Strategy Grinds Gears
Last night, Sharma’s tone was as self-assured as ever. The lidar CEO continued to underscore Microvision’s strong competitive position and “best-in-class cost advantages.” Sharma again highlighted Microvision’s important technology differentiators (e.g., scalability, size) noting that the company has received “acknowledgement of these features” from OEMs. Finally, he hinted at industry consolidation, reminding investors that “no company can go it alone for such a mission-critical safety system.”
Now, for the bad news. Microvision announced a bit of a gear-shift in its lidar strategy. It rubbed investors the wrong way.
The company plans to focus on automotive OEMs — so called “strategic sales” — rather than targeting car manufacturers directly (like Luminar and Innoviz).
Microvision’s OEM strategy means that it probably won’t see any real lidar sales anytime soon. In fact, Sharma said he didn’t see the lidar industry producing meaningful product revenues until 2025 or beyond. For its part, Microvision expects to introduce a more customized OEM lidar product for ADAS (Advanced Driver Assistance System) features in June 2022. Note that a direct-to-carmaker lidar won’t be ready until Q4 of 2022.
Even for long-term investors, that’s a long wait.
To be clear, the OEM business may ultimately prove to be the real “prize” in lidar, with much bigger sales potential. The trouble is, investors will equate the push-out in timing as an admission of defeat. With guidance calling for yet another sequential revenue decline and OPEX expected to ramp as Microvision introduces its lidar products to OEMs, there’s nothing to get excited about right now.
The Bottom Line on MVIS Stock
Don’t get me wrong, automotive lidar is a legitimate market. It’s supported by advancements in autonomous driving technology and tightening regulations over vehicle safety.
But if we’ve learned anything from Microvision’s earnings call, it’s that it’s still too early to be investing here. Sadly, Microvision right now is less Bond and more Batty. For long-term investors, hope is washed away — futile, like tears in rain.
And because every stock, like every replicant, has a termination date, the market is about to retire MVIS shares — for now. Let’s hope we don’t have to wait until 2049.
Your comments and feedback are always welcome. Let’s continue the discussion. Email me at jmakris@investorplace.com.
On the date of publication, Joanna Makris 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.
Joanna Makris is a Market Analyst at InvestorPlace.com. A strategic thinker and fundamental public equity investor, Joanna leverages over 20 years of experience on Wall Street covering various segments of the Technology, Media, and Telecom sectors at several global investment banks, including Mizuho Securities and Canaccord Genuity.
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