Valuing MVIS Looking Back And Forward

Rarely do I write about one topic so much in so short a time, but MicroVision is in a unique situation. Watching several videos and reading dozens of posts since the earnings report inspired the following perspective on perspectives.

“OMG, MVIS is worthless.!” OMG, MVIS is going to be the biggest thing!” Well, yes, or no, or probably something else. After twenty years of mainstream silence about MicroVision (the company) and its stock (MVIS) it is phenomenal to see so many posts, videos, analyses, and articles about the company and the stock. No surprise, they don’t all agree. At least for now, they may both be right, from their particular perspectives. 

There are plenty of memes about perspectives but because this post is about investing I suggest looking at a dollar bill. One view: It has a picture of George Washington. Another view: is has a picture of a pyramid and an eagle. Yep. Either view only gives half the story. 

In the last twelve months MVIS is up over thousands of percent. (It varies a lot because the stock price volatility from then and now.) The high point I’ve seen was 9,602%; oops, now 10,173%. On March 11, 2021, MicroVision announced earnings. Since then equally passionate people have claiming the company is barely worth anything, while others see it being the start of a new technological revolution which makes it effectively priceless – in a good way. 

Google Finance

Welcome to two common points of view in the stock market. A third will follow.

Let me tell you a story.

I know someone who is active in the stock market, understands data, and is adamant that the best (but not only) way to estimate the value of a company and its stock is to look back over the last five years of earnings reports. Past performance may not predict future growth, but at least the data are audited and official. By that measure, MicroVision, is making less money per year more than a few people. “Sell the company and go get a job” sort of thing. 

I know someone who is active in the stock market, understands data, and is adamant that the best (but not the only) way to estimate the value of a company and its stock is to look ahead. Looking ahead is inherently guessing, but intelligent guesses can lower risk sufficiently to invest. Investing is about the future, so where the company is going is more important than where it’s been. If they’re not going anywhere, why buy them? 

Looking back is effectively relying on the world not changing significantly. Looking ahead is effectively relying on predicting the future. Well, the world is changing, but we can’t know how. Assuming nothing ever changes has trapped many people and companies in archaic institutions and anachronisms. Assuming we can predict the future has led to many predictions that look silly years later. 

And then, there are the people who ignore the company, and who only care about the numbers game of how the price is moving, and project the future by applying methods based on correlations of previous market actions.

So, there are three models. 

Those two people I mentioned above represent a couple managing the same portfolio. Their best performance was when both of them were correct; the past performance suggested continued growth, and analyzing trends suggested a company well positioned for a changing world. You may not be surprised to hear that such a confluence was rare – but very profitable. And that when they didn’t agree there was tension.

An easy example. Look back about twenty years. Barnes & Noble was a bookstore with decades of financial reports, appealing stores, and growth. You know Amazon gets mentioned next. A short history, an unproven business model, and an unconventional CEO. Old and steady focused on profit. New and aggressive focused on growth. Oh well, a missed opportunity. (They didn’t buy AMZN.)

So, here sits MicroVIsion. Financials aren’t encouraging, on their own. There’s great sentiment behind the projections, but most of it is based on speculation. And MVIS is up over 10,000%. Irrational optimism? I’d like to say yes or no, but we won’t know for months or years. 

Google Finance

The more astute readers will realize that I tend to look forward, otherwise I would’ve sold MVIS over a decade ago. Until a year ago, that would’ve been considered a wise choice. But, I held. I’d like to say it was because I saw this coming, but it was really because the stock had sunk so low that maintaining the tax losses was more valuable, also I hold out of habit because I’ve seen patience pay off well before (examples in my book, Dream. Invest. Live.), and because I still thought the trends were leading MicroVisions’ way (even as it seemed that management couldn’t capitalize on their position.

And here is MVIS at over $17.40 after setting a record low of $0.15. Which is the value that is closer to correct? Here’s my opinion. Opinion, opinion, but a factual declaration. Opinion. 

My previous MicroVision/MVIS post helped clarify my thoughts and conjectures. The range of possibilities is infinite with the majority of the cacophony seeming to be focused on either valuing the company and stock based on a buyout, or basing it on the value of the product; with, of course, a camp that thinks pennies may be more correct than dollars. 

My opinion. I have no expectations. The situation is unknowable, possibly even for the company’s management who know far more than we do. Even they may not know the intentions of suitors and customers and competitors. I am keeping in mind that it is possible that one of the product lines and attendant patent portfolios will be sold off for a very large sum. That acquirers gets exclusive rights and MicroVision gets cash ($2B seems possible based on nothing more than the mood in the community.) Another product line could become committed to a partnership or joint venture initiated partly with cash, and with profit sharing. The partner basically funds MicroVision’s continued development of that product; e.g. cash in exchange for buying into a hopefully successful product. (At a guess, and it is a guess, $1B in cash and hopefully eventually hundreds of millions in revenue, though those revenues may take years to actualize.) The remainder of MicroVision’s products and patents remain in a MicroVision which temporarily has a smaller product base, but a significantly better balance sheet, possibly enough for MicroVision to become an acquirer of other firms and their technologies and patents. It’s a complicated scenario, but life frequently becomes more complicated, rarely does it get simpler – unless that’s because plans fail.

(For example:

LiDAR sold off to Apple or Ford or…,

Augmented Vision developed in partnership with Microsoft,

Stand alone displays, interactive displays, et al remains with MicroVision.

In such a scenario, initial assets are at least $3B. Near term (within three years) revenues are guessed at ~$0.2B. Longer term revenues are guessed at $1B. To simplify the calculation, if that partial buyout is for about a quarter of the company, then each of the other thee quarters can be valued at $2B. ($3B cash +3X$2B in valuation + price/sales of 6 X $0.2B = $3B+$6B+$1.2B = $10.2B market capitalization.) Divide $10.2B by the number of shares of roughly 150,000,000 = a price for MVIS of ~$68.

That’s a guess. I’ll barely call that an analysis. It’s just a possibility, like any number between zero and the GDP of the world is a possibility. It’s just that zero and infinity are possibilities that are highly improbable. 

Discount it for risk, and get to zero. Multiply it by a premium and, well, who knows? 

Personally, my guess is handy for quieting my anxieties and eagerness. Because so many of my shares were bought before the reverse split, it doesn’t make sense for me to sell before ~$57. My guess shows me that it is possible, but I don’t know if it is probable. Beyond that, $100 would help me re-retire, partly because I’m now old enough for Social Security. $200, yeah, that’s retirement, probably remaining in my house – which would finally get new windows and a new roof. $300, sure, retirement with more style. $400, ah, back to being a philanthropist (long story, but I’ve been there before.) But, a move from $17 to $18, nice to see, welcome for sure, but not something that prompts me to sell. 

Usually such analyses have been about companies and stocks whose stories would take years to enact. MicroVision’s story is different. Looking back, it has been a very long road taking place over decades. Looking forward, major events can happen any day, with strong suggestions that big things will happen within weeks. Both are right.

About Tom Trimbath

real estate broker / consultant / entrepreneur / writer / photographer / speaker / aerospace engineer / semi-semi-retired More info at: https://trimbathcreative.net/about/ and at my amazon author page: http://www.amazon.com/-/e/B0035XVXAA
This entry was posted in Uncategorized and tagged , , , , , , , , , , , , . Bookmark the permalink.

1 Response to Valuing MVIS Looking Back And Forward

  1. Any Anderson says:

    Yep

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s