Jun 1, 2021
[7 min Read]
Based on a company comparable valuation for the Lidar industry, MicroVision is undervalued and presents an upside of approx. 150%. The company presents strong technology and patents that will be valuable for future high-growth markets which strengthens the claim they are undervalued at its current price.
MicroVision, Inc. develops lidar sensors used in automotive safety and autonomous driving applications. Its laser beam scanning (LBS) technology is based on micro-electrical mechanical systems, laser diodes, opto-mechanics, electronics, algorithms and software. Our lidar sensor also utilizes edge computing and machine intelligence as part of the solution. Though automotive lidar is our priority now, we have developed solutions for Augmented Reality, Interactive Displays, and Consumer Lidars. Since February 2020, MicroVision has been focused on strategic alternatives, including a potential sale or merger of the company, sale of part of the company, strategic minority investment, as well as licensing and other transactions. Despite their highly sophisticated technology, they currently have no agreements or commitments to engage in any specific strategic transactions. While they continue to pursue strategic alternatives, they plan to continue focusing on increasing the value of the company by completing development of their first generation LRL module to a level that it would be ready to scale in the market.
Major Shareholders: Vanguard Group (4.17%), State Treasurer State of Michigan (2.74%), Blackrock Inc. (1.66%)
Overall increased buying throughout institutions often signifies strong backing of a company by analysts at the institutions (the “smart money” thinks the firm is a good investment)
Technology: PicoP Scanning
MicroVision's patented PicoP Scanning technology utilizes an ultraminiature MEMS mirror to scan a modulated laser beam using state-of-the art control systems. This core technology is their platform for use in their products such as interactive displays, etc.
Long Range Lidar (LRL) - a lidar sensor for OEM and Tier-1 automotive suppliers to be incorporated into automotive active collision avoidance systems and autonomous driving vehicles. This product will also be targeted for sales to technology companies focused on Mobility as a Service (MaaS) with the MaaS customers are currently major users of automotive lidar sensors. The sensor is targeted for Level 3 (L3) autonomous safety and Level 4 (L4) autonomous driving applications.
Microelectromechanical Systems (MEMS) - module that can support augmented reality headsets. MEMS mirrors have already found enormous commercial success in projectors, displays, and fibre optic communications. The most critical characteristics of MEMS lie in the fact that are small and steer light in free space.
Interactive Display module - display solution target at the smart speaker's market and is designed to project onto a countertop, tabletop or a wall from inside a smart speaker. The user can then touch the projected image on any surface on which the display is visible, and it will behave like a touchscreen, as on a tablet or smartphone.
Consumer Lidar - small lidar sensor for indoor use with smart home systems. This allows for a smart home system to understand what is happening in the home and then enable the smart home to respond in an appropriate way.
Sumit Sharma, CEO - Sumit was appointed Chief Executive Officer and a member of the Board of Directors in February 2020 but joined as early as September 2015, overseeing the company's engineering, operations and R&D functions. Sumit received a B.S. degree in mechanical engineering from the New Jersey Institute of Technology. Before MicroVision, Sumit held leadership positions in engineering and operations at Jawbone, Google, and MYVU Corporation.
Stephen P. Holt, CFO - Stephen is a Certified Management Accountant, holds a Bachelor of Science from California State University, Chico and an M.B.A. with honors from Santa Clara University. Stephen joined MicroVision in April 2013 as Chief Financial Officer and brings more than 20 years of financial management and operations experience with public and private companies across multiple industries including consumer electronics, medical, transportation and software, and ranging in size from pre-revenue start-ups to $600M in annual revenue.
Augmented Reality (AR) Sector - the global augmented reality market size was 4.16B in 2020 Ann is projected to grow from 6.12 billion in 2021 to 97.76B in 2028 at a CAGR of 48.6% in the forecast period of 2021-2028. A key driving factor lies within the healthcare industry with their increasing adoption of AR technology. The technology provides a real and virtual environment that helps in performing tasks efficiently - for instance LV Prasad Eye Institute collaborated with Microsoft HoloLens to develop a learning app Holo Eye Anatomy which helps medical students to learn eye anatomy.
Object Detection: Automotive Lidar Market - In today's global automotive industry, the demand for numerous automotive electronics is significantly increasing. The automotive Lidar market size was valued at $521M in 2019 and is projected to reach $4,348M by 2027, presenting a CAGR of 30.4% during the forecast period 2019-2027. The adoption of automotive LiDAR solutions is growing due to the increasing advancements in the automotive industry, surging demands for advanced security features, and rising number of autonomous vehicles.
Object Detection: Smart Homes - In 2018, the global smart home market size was valued at $80B and is projected to reach $623B by 2026, representing a CAGR of 29.3% during the forecast period 2019-2026. Globally, several are adopting green building policies which is creating huge opportunities for the smart home market in the coming years. Several initiatives and projects have been launched by different governments to promote the development of green buildings. In addition, advancements in the data communication technology and smart city projects are some of the key emerging opportunities that would augment smart home market revenue.
MicroVision is participating a vertical diversification, where their business operations are within the same production. By diversifying their company, they are able to grow their market share, increase their sales/revenue, reduce their impact of changes in the market, and achieve higher margins compared to existing markets. Given MicroVision's products and its diverse range of applications coupled with approximately 450 patents, there is a high chance that at least one, if not more, will be a successful product line that will serve the future markets. MicroVision's identified 3 rapidly growing markets and tailored their products to these markets, and we will see that be reflected in their revenues after their products become available on the market.
“I've talked about my personal belief that long term, MicroVision technology will unlock billions of dollars of market revenue for us and our OEM partners.” - Sumit Sharma
Sharma stated in April of this year that they expect a version of their lidar sensor to be available for sale in Q3 or Q4, so the company can expect to generate more revenue for their year-end 2021 compared to your FY2021. Using a projected $2M forecast within the next 3 years, I generated a forecast chart to roughly show the annual revenue leading to $2M. The $2M estimate was retrieved from another analysis that explained further explains how $2M is still a modest number for MVIS.
For the comparable analysis, I found 8 companies that were of competition to MicroVision that was also found through their 10K report. Using the forecast chart, I came to an expected revenue of $52,317,500 for this year which might see like a big increase given last year's revenue of $3,090,000 but since their LDR becomes ready for sale later this year and that a majority of their revenue is generated from contracts with other companies, the $52,317,500 is a realistic value. The base case presents an equity value of $38.12 representing a 150% upside. The bull case presents $63.86 a share representing a 318% implied upside.
Failure to raise additional capital to fund their operations and implement their business plan. While they continue to pursue strategic alternatives, their plan to focus on developing their automotive lidar module would involve introducing new technology into an emerging market which creates significant uncertainty about their ability to accurately project revenue, costs and cash flows. Raising additional capital may involve issuing securities with rights and preferences that are senior to our common stock and may dilute the value of our current shareholders' shares
If their technology system or products incorporating their technology don't achieve market acceptance, then their revenues may not grow. To be accepted, their LBS technology must meet the expectations of our current and potential customers in the consumer electronics, automotive, and other markets
I believe their technology and designs for automotive lidar can be successful in several markets as discussed for the investment thesis. The company is strongly positioned at the forefront of 3 rapidly growing markets as identified above. This stock has incredible potential and I believe the company is worth well over $2.4B market cap.