MicroVision Stock Is a Bad Bet on a Short-Squeeze and a Worse Bet on Lidar

Stocks to sell

Excitement over its move into lidar sent MicroVision (NASDAQ:MVIS) stock parabolic back in April, but it didn’t last wrong. As the “meme stock” hype around it faded a bit, shares have fallen back to around $14 per share, down from prices above $25 per share.

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With around 21.5% of its outstanding float sold short, there’s been talk of the stock benefiting from a possible short squeeze.

Short-squeezes may have helped stocks popular with users of Reddit’s r/WallStreetBets skyrocket last winter. But, I wouldn’t count on this trend repeating itself, helping to send this back to prior highs.

Sure, a squeeze isn’t the only way shares could rebound. Further progress with the commercialization of its lidar technology may help to give it a boost. Yet, this too may be a long shot. MicroVision is still up big since last November, nearly all due to the lidar catalyst. The stock’s valuation already overestimates the chances of its lidar business, still a work-in-progress, becoming a big success.

So, with little chance of a full rebound, what’s the best move? Continue to hold off buying. If shares fall back to pre-hype levels, it may be worth the risk. But, now? Not so much.

MVIS Stock Today Fully Prices-In the Lidar Catalyst

If you’re looking to buy MicroVision to gain exposure to the lidar technology boom, it’s too late. Yes, automakers are speeding up the integration of self-driving technology into their vehicles. And, lidar (laser radar) technology is one of the best means to facilitate such capabilities.

Unfortunately, the lidar catalyst is more than reflected in the price of MVIS stock. Why? As I previously wrote, this company is more of an “also-ran” when it comes to its status in the lidar industry. Rivals like Luminar (NASDAQ:LAZR) and Velodyne Lidar (NASDAQ:VLDR), on the other hand, have first-mover advantage on their side.

Things may be moving fast in the lidar space, but the time where this is a widely-used technology (and in turn, a massive industry) remains years away. Putting it simply, there’s little logic behind valuing this stock as if it’s set to “crush it” in the lidar space.

At today’s prices, the company has a market capitalization of $2.2 billion. Yet, sales for this year are only expected to come in at around $4.15 million.

At $2.2 billion, the market is giving this company a higher valuation than Velodyne, which has a market capitalization of just $1.84 billion. Even as that more established rival generates nearly $100 million in lidar sales.

There’s a Poor Risk/Return 0n a Short-Squeeze Bet

The fundamentals of Microvision may not match up with its current valuation. But, shares could see one last boost via a short squeeze. With so much of its float sold short, all it’ll take is a breadcrumb of good news (or a piling in by Reddit traders) to send this stock back near its highs once again.

A few days back, MVIS stock showed signs of kicking off a short squeeze-related rebound, as InvestorPlace’s Chris MacDonald wrote, but it’s still too early to tell whether online retail speculators can once again beat Wall Street’s so-called “smart money” at their own game.

At best, a full-on squeeze back to $25 per share is a long shot. Not only that, speculating on this angle alone may not make sense from a risk/return perspective.

What do I mean? The Reddit set may be able to put this stock into squeeze mode once again. However, it may not play out the way you want it to play out.

That is, instead of shares bouncing back fully to $25 per share on squeeze, it may only experience a bounce back to, say, between $17.50 and $20 per share. In other words, a possible 25%-42% gains from today’s prices.

Sure, that doesn’t sound like a bad return, but what happens if the “diamond hands” still holding it turn into “paper hands?” Instead of squeezing its way back to $20, or even $25 per share, the stock could see another big move lower, back to single-digits. Bottom line: chasing this for the squeeze potential doesn’t appear to be worth the risk.

Continue to Sit Out on MicroVision

The company could end up proving its skeptics wrong, and come out with a lidar platform that’s a commercial success, but, still priced as if it’s already done so. It makes little sense buying it at today’s prices on just the lidar catalyst.

There may still be short-squeeze potential here, but this too is hardly a reason to buy. The “Reddit effect” is no longer as strong as it once was. The risk of big losses overshadowing the potential for another round of squeeze-fueled gains. Bottom line: your best move with MVIS stock remains the same. Stay away.

On the date of publication, Thomas Niel 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.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.