The dashboard for MicroVision (NASDAQ:MVIS) the action is misleading. Investors should be satisfied with its cumulative performance of 73% since the start of the year. After all, it’s three times better than the S&P 500. Yet things are not what they appear to be. Over the past 6 months, the stock of MVIS has fallen off a cliff.
With that reality in mind, let’s see if it’s worth catching that falling knife.
The electric vehicle (EV) opportunity is one of the hottest investment themes on Wall Street. Over the past 2 years, and in large part thanks to the efforts of You’re here (NASDAQ:TSLA), investors pursued this concept.
The field of excitement was very wide in the early stages. People saw opportunities from all kinds of businesses on the sidelines. Now they are focusing more and leaving behind some sad stories. One of them was MicroVision. Judging by stock MVIS action, sentiment has undoubtedly turned sour.
Since the highs in May, it has lost 70% of its value. So far, it has shown no signs of stabilizing. Earlier this year, the rally intensified after a battle around $ 7 a share. It can be assumed that there will be buyers hiding as the price gets closer. Although it is not a cement floor, it does provide a zone of hope for the bulls.
MVIS Stock is not for everyone
Those who already have a long acting MVIS are probably too late to panic now. Conversely, starting a partial position for a long-term recovery seems like a good opportunity for profit. The stock is not suitable for all portfolios. It would be better suited for investors looking for an aggressive bet on future trends. Until then, catching that falling knife involves more hope than substance.
The company is used to develop a self-guided technology called lidar. Much of the rising enthusiasm in January was due to its application in autonomous driving. Realism has set in because we always drive our own cars. Worse yet, the autonomous market is still far into the future.
Hope we have the technical know-how to do it now. However, just this weekend, the CEO of Tesla Elon Musk has announced a setback with his technology. Plus, there are insurmountable legal hurdles to consider… at least in America. Nonetheless, investors are focusing too narrowly on a potential source of business. Until there are real tangible results, experts are right to doubt the future of this opportunity in MVIS stock.
So far, the income is minimal; therefore, the entire share price comes from a future hope. By definition, this makes MicroVision a speculative bet on what might come next. As everyone searches for an opportunity with electric vehicles, they will likely end up with many industries to serve. Management would help the stock price immensely if it could refocus attention. I suspect they can make an easy argument for applications in manufacturing and delivery.
Beware of the potential bite of the FANG
MVIS action could also present extrinsic risks this week. After a short bearish stent in September, investors are now breaking new records in the indices. However, this week can bring a lot of binary and two-way movement. Most large-cap tech stocks are reporting earnings this week. Therefore, it is a giant wild card in the short term. If the giga-caps suffer a fate similar to that of Snapchat (NYSE:BREAK), the clues will struggle. If so, MVIS will suffer as well.
Strong reports from FANG gangs will not guarantee a reaction to rising stock prices. For example, SNAP ran into a small lack of estimates. Investors have completely ignored the real growth in users, profitability and sales. The newsletter showed strong absolute growth and the headline fell 25%. MVIS stock cannot recover if the markets fall.
Technically, there could be a rebound to $ 8 per share from February. However, he is too far away to trust him to serve as a hard floor. I would describe it better as a support area that stretches up to $ 6 per share. In percentage terms, it’s a large buffer, but it’s the best the chart can provide at this point.
MVIS action has drawn a very steep descending wedge. Often, these can provide violent gatherings of quick return. As with all speculative bets, it is prudent to keep the size small. Most importantly, and if the sale persists, it is important to refrain from adding to it.
The average of questionable stocks does not usually end well. Those who tried it at $ 14 a share, down from $ 22, now have double the problem they initially had.
At the date of publication, Nicolas Chahine did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
Nicolas Chahine is the Managing Director of SellSpreads.com.