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Why MicroVision Shares Crashed in October

By Anders Bylund – Updated Nov 8, 2021 at 2:30PM

Key Points

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Investors were reminded that the LiDAR sensor specialist doesn't have any real business prospects yet.

What happened

Shares of MicroVision (MVIS 17.13%) fell 31.1% in October 2021, according to data from S&P Global Market Intelligence. The maker of laser-beam scanner sensors for self-driving cars and 3D sensing systems took a big hit from disappointing earnings near the end of October, but the downward trend started much earlier.

So what

MicroVision reported a net loss of $9.4 million and negative operating cash flow of $10.0 million in the third quarter, all based on top-line revenues of just $718,000. The company is burning through a lot of cash with no significant source of incoming revenues. Investors hope that MicroVision will become a preferred provider of light detection and ranging (LiDAR) systems for self-driving cars, but there are no firm deals in place, and the marketplace is packed with plenty of competition.

The path to future profits and revenue gains is so murky that CEO Sumit Sharma treated "a number of requests for additional information and proposals" as a big win in the third quarter. At the same time, he indicated that meaningful sales are at least four years away. Investors were less enthusiastic, and the stock closed 15% lower the next day.

Rendering of a car driving through digital data.

Image source: Getty Images.

Now what

The bigger picture here is that MicroVision was a popular meme stock in the first half of 2021. However, the unpredictable but mostly positive energy building around the stock is fading. Mind you, the stock could be headed for another round of meme-stock volatility because short-seller interest is on the rise again. The meme-stock crowd likes to play with heavily shorted stocks because a sudden price jump could trigger a short squeeze, driving share prices much higher for a short time.

Pocketing massive gains in a get-rich-quick scheme involving a short squeeze sounds fantastic, but it's a risky tactic that rarely pays off in the long run. I recommend ignoring the meme-stock aspect of MicroVision so you can focus on the company's actual business value, which looks incredibly low at this point. You can invest in self-driving car technologies from many other angles, often with far less risk.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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