Three difficult months have passed for MicroVision (NASDAQ:MVIS) Investors who held shares of the technology driver for autonomous driving through decline. The stock is trading at 79% from the 2021 high, but may still make a strong comeback if management makes a deal or two next year. Should MVIS stock investors expect a recovery?
MicroVision is a developer of remote sensing technology for detection and light ranges (LiDAR). It seeks to create large supply deals in an evolving sophisticated automotive industry that is gaining self-driving capabilities. The company presents a deep intellectual property portfolio and compelling value propositions for its small leader offering, but it lacks a key asset that is critical to its future success – long-term contracts.
Investors can predict MVIS stock trading mostly sideways in the coming year. Potential declines in revenue, increased cash burn rates and safe dilution could weigh on 2022 MVIS shares.
MVIS stock: Expect revenue decline and cash burn increased in 2022
During the third quarter of 2021, MicroVision recognized Income of $ 718,000 Which referred to royalties ma $ 10 million prepayment deal With Microsoft (NASDAQ:MSFT) Made in 2017. The company earns royalties because its customer manufactures licensed components. The balance of unearned income in the balance sheet decreased to total $ 5.8 million Entering October.
Management expects to recognize $ 500,000 to $ 600,000 in revenue from the prepaid deal in the fourth quarter. The company’s declining revenue rate may continue in the coming quarters.
At current revenue recognition rates, it may take another two years for MicroVision to exhaust the prepayment. The customer will not make purchases in cash until the balance is exhausted.
The problem with MicroVision’s situation is that current royalty revenues do not contribute anything to the company’s cash flows. The money paid in advance has already been spent, has already disappeared.
MicroVision needs to get a new customer who pays in cash soon. Given the business’s increasing cash burn as it raises more talent, increases inventory and invests in business development efforts, a new cash injection may be required in the next two to three years.
MVIS had a seemingly healthy cash balance of $ 125 million in the fourth quarter, but cash burning rates are likely to expand from north to $ 10 million in the quarter, starting this quarter.
Safe dilution for MVIS stock investors in 2022?
Higher cash burns and non-cash revenues could trigger a significant dilution of shareholders in 2022.
If the MVIS stock remains inactive for a longer period of time, the company’s remaining capital raising capability in its ATM program with Craig-Halum Capital Group Can be abused at low stock prices. The ATM may be diluting more than other similar transactions recently.
Given an increased reward based on future stocks, dilution may worsen if a purchase transaction does not arrive in the near future.
Optimistic MicroVision management, after peer verification
MicroVision’s leadership remains too bullish as it describes how the company’s LiDAR offering beats competitors on all critical fronts. Just need to go through that of the company Transcript of a conversation for profits in the third quarter of 2021 Read one of the most beautiful and encouraging features for MVIS stock as presented by the optimistic CEO of the company Sumit Sharma.
MicroVision believes it beats competitors in cost, design features, size, latency and operational scalability. its LiDAR’s apparent scan range of 250 meters Looks like its toughest competition. The MVIS sensor ranges place it in the same parentheses with Of Innovis (NASDAQ:INVZ) Offers a leader, Of Oyster (Symbol:expelCompeting system, and Of Eva (Symbol:AEVA) Lidar’s flagship product. MicroVision’s offer even threatens to win Of Valau Sensor range of 200 meters.
However, there are no standards by which the various lead systems from a number of start-ups can be tested to compare apples to apples. Interestingly, such standards can be developed soon. Even more interesting is the fact that MicroVision will take a critical role in the industry for this purpose.
Microvision and Innoviz are just two of three LiDAR developers Chosen to join LiDAR’s consortium Headed by fka GmbH, A leading research and engineering services for vehicle testing in Germany. The consortium includes several leading global automakers and top suppliers to the automotive manufacturing industry.
To a market observer, the invitation to set industry standards seems like a strong peer-to-peer for MicroVision’s lead in LiDAR’s development. Inubiz Signed industry deals With BMW and Magna.
It is best not to repeat yourself in MVIS shares
MicroVision is bullish and confident that it will succeed in the automotive industry. However, there are no signed customer transactions yet to verify its management claims.
Investors will remember that MVIS failed to get a customer to launch its first module in 2020. It diverted its attention to strategic alternatives that included the complete sale of the business. Nothing has happened yet (since February 2020), and there are no suggestions on the episode to date.
However, the company reported positive feedback from its marketing presentations at the Munich 2021. Exhibition aims to gain new deals that may generate recurring revenue from car models 2025 and beyond.
Maybe the innovative company will make a deal around CES 2022 Car Show in Las Vegas. It must; It needs one.
Analysts estimate a potential increase in revenue of Around 175% year-over-year for 2022. The achievement will depend on new deals and partnerships. The company needs new business next year. Its micro-display offering, augmented reality and virtual reality are supposed to help bring something to the top line next year. History should not be repeated this time.
If so, MVIS stock may print new lows in 2022.
At the time of publication, Brian Pardesa did not have (either directly or indirectly) any role in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the advertising guidelines of InvestorPlace.com.
Brian Pardes is an investment enthusiast who won the CFA in 2019. Brian, a strong believer in long-term investment-based investments, learns from gurus like Warren Buffett, but recognizes human behavioral tendencies that drive short-term “madness.” You may find him curious as he explores opportunities for investing in technology, cannabis, blockchain and the new asset type of cryptocurrencies.