As I’ve told others on social media and discussion boards;
“I didn’t expect to have to update my MVIS model so soon. In it I played with (and it really isn’t much more analytical than ‘play’);…” (Valuing MVIS Looking Back And Forward)
These have certainly been dynamic times for one of my stocks: MVIS. Of course, that’s because these might just be dynamic times for that stock’s company: MicroVision. Notice the word ‘might’.
I’ve mentioned the company and the stock often throughout this blog’s history (#MicroVision, $MVIS). (Too often for some who want to read more about personal finance, frugality, community, sustainability, etc.) Until about a year ago the stock posts were in the far minority, but then things started happening. Lately, ‘things happening’ has become a weekly event. April through June may be busier than that.
Within about thirty minutes at the end of the trading day on March 31, MVIS went up over 50%. There are many predictive models for stock movements, but picking out the right thirty minutes of one day from twenty years ago is Ouija Board territory.
“Microsoft wins U.S. Army contract for augmented reality headsets, worth up to $21.9 billion over 10 years” – CNBC
To recent shareholders, much of the attention was directed to the progress in LiDAR, the component considered necessary for autonomous vehicles. Driverless cars still need to pay attention to the road.
Prior to that, much of the attention was directed to progress in Hololens. One intrepid shareholder’s video of disassembling Microsoft’s new augmented reality rig showed MicroVision was part of the product – time three. Three MicroVision components per unit, at least in that version.
About a year ago, the stock hit a low of $0.15, at which point the attention was drawn to the prospect of some company buying MicroVision (maybe for as much as $5!) Wither Or Whether MVIS
Longer term shareholders are more likely to be aware of much more: smartphones with embedded projectors, display-enabled smart assistants like Alexa, home theater units, LiDAR for the home and for factories and vehicles, augmented vision eyewear, interactive displays, and enough more that I can’t remember them all. (Others can recite the entire list, I am sure.)
The news that moved MVIS was news for Microsoft that didn’t mention MicroVision. That’s no surprise. Any bit of significant electronics can contain dozens of subcomponents. A company like Microsoft will spend their time selling the product, not listing suppliers. The Microsoft product is the military version of the Hololens product (IVAS) mentioned in that breakdown video. Does the current version of Hololens include MicroVision? Probably. If MicroVision is involved in Hololens does that mean MicroVision is also a supplier for IVAS? Probably. The news was expected. The details weren’t.
There’s always someone out there who guessed right, but most of the discussion was for at most about $2B for Hololens/IVAS. The Microsoft announcement was for over $20B. Surprise. Ah, but that was for the next ten years. Divide $20B by 10 and get $2B. Still welcome. But bump that up again because that announcement was for the US Army getting 120,000 units. IF MicroVision is inside, that’s 360,000 subcomponents. Bump it up again because there are also possible sales to the rest of the US Armed Forces, and then there are allies, and then…? So, the top end increases significantly. That can explain a 50% stock price jump in thirty minutes for a company valued at less than $0.1B last year.
But, here’s one element of risk. MicroVision is well-known for remaining quiet about details of contracts. Whether that’s competition sensitivity, NDAs, or reticent management is difficult to tell. Microsoft mentioned a customer (the US Army), a quantity (120,000 units), a value (~$20B), and a time-frame (10 years). Microvision said – – – – – nothing. Without confirmation from either corporation, verification hasn’t been made. As for the most recent version of Hololens, we can’t expect that stockholder to spend yet more thousands of dollars to continue opening up functional hardware. As for IVAS, I suspect the US Federal Government would do much more than be upset if a shareholder dismantled an IVAS unit. So, without MicroVision management making an announcement I’ll continue to be aware of the risk – while appreciating the stock appreciation.
That risk may be why, after a 50% rise one day, the next day MVIS was down 16%. Progress, but not a direct ascent to the heavens.
Such events are also why I prefer my investing approach of Long Time Buy and Hold. (See my book, Dream. Invest. Live. for details.) My patience has been strained and drained over twenty years, but if you want to get an idea of how quickly news and stocks can happen watch the daily livestream from an enthusiastic shareholder who had to step away to go the bathroom about the time the news happened.
And then there’s April.
As I said above, April is anticipated because the new more-communicative MicroVision management announced several weeks ago that the LiDAR component will be available for customer testing and integration (at least) sometime in April. That news bumped the stock back then. (Dynamic MicroVision And MVIS) That was just the news of anticipated news. April should include the announcement of the delivery. I didn’t expect any company to announce news on April Fools Day, so the news could happen as early as April 2, as late as April 31, could be delayed, or could be, could be. Considering the IVAS surprise, the LiDAR surprise could be just as dramatic.
And then there’s June-ish.
Management comments suggest (forward-looking statements and all) that the buyout negotiations continue, possibly being concluded on or about June. Of course if MVIS has climbed sufficiently is it only purchased in bits? As I’ve written before, I feel sorry for the folks on the other side of the negotiating table.
Let’s go back to that play model I referred to at the start. Two weeks ago I posted “Valuing MVIS Looking Back And Forward“, which has become the most popular posts on this blog.
I’ll keep the basics to same to minimize my confusion. I hope that helps, you, too.
“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.”
Now (many assumptions are included explicitly and implicitly and accidentally). Hmm. As I consider this, the total value doesn’t change much except for the Augmented Vision component.
If MicroVision is inside Hololens and IVAS, then the value of the parent company has fundamentally increased, but I’ll assume profit margins remain the same for conservatism.
“Near term (within three years) revenues are guessed at ~$0.2B.“
Looks higher now. That $0.2B is one tenth of one tenth of Microsoft’s revenue, not profit, from the IVAS/Army contract. I’ll raise that a bit to account for Hololens + IVAS/Army + IVAS/others. Let’s say $0.4B for near term potential. Use my regular Price/Sales ~6 suggests ~ $2.4B for the value of near-term future revenues translated to a stock value.
That adds $1.2B to my rickety wobbly valuation model from $10.2B to $11.4B, and a price for MVIS of $76. MVIS was at $0.15, is at about $15, which puts the valuation at just over 5X the current price. Well, $15 looked silly when staring at $0.15. One hundred times that can make one think another factor of five is silly, too; but without knowing more, I have to work with what I have. (And have the time to research and analyze.)
Personally, if I didn’t sell at $0.15 (a time of very little news), then why would I sell at $15 (a time of greater potential) when there is real, positive, significant news supposedly near?
Or, Murphy strikes again, Lucy pulls the football away from Charlie Brown, Wylie E. Coyote realizes that tunnel is really just something painted by the Roadrunner.
And, in the midst of all of this, one of my other companies and stocks (NeoPhotonics/NPTN, market cap ~ $0.65B) may be a buyout target from a firm (Lumentum/LITE, market cap ~ $7B) that cancelled a buyout of another firm (Coherent/COHR, market cap ~ $6.3B).
Not a dull year. Great potential. Ah, but not enough to feed my checking account – yet.