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The Microvision share price is up 170% year-to-date, is this stock a buy?

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Microvision (NASDAQ:MVIS) has seen significant share price activity in recent weeks. The reason for the volatility appears to be a push from retail traders on Reddit’s r/WallStreetBets forum. This is the group connected to the GameStop short squeeze in January. Year-to-date the Microvision share price is up over 170%, but it’s down 50% from its 52-week-high. This company has a long history but carries extensive shareholder risk, so is it a good long-term investment?

What does Microvision do?

Microvision is developing a LiDAR sensor for self-driving cars. This futuristic technology uses artificial intelligence (AI) and machine learning to ensure safety. It’s vital in avoiding collisions in autonomous driving. Furthermore, Microvision’s technology can adapt for use in augmented reality, interactive displays, and consumer LiDARs. For instance, a consumer can interact with a projected image, as it behaves like a touchscreen.

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Revenue streams and competitive advantage

In recent years, the company has made money from selling AR displays, components and LiDARs that manufacturers can incorporate into their products. This hasn’t been producing meaningful revenue, so it’s now considering selling a part of the company or merging.

Meanwhile, it’s focusing on completing its first generation LRL module to scale in the automotive LiDAR market. It hopes to have this ready for sale later this year. This technology is claimed to be immune to interference signals from other LiDARs, rogue malicious signals and interference caused by sunlight. This suggests Microvision has a competitive advantage.

Nevertheless, competition is rife. Competitors include Velodyne, Luminar Technologies, Texas Instruments, Intel, Bosch, Pioneer, Sony (LCOS) and several more.

The company also has the potential to make money from selling its automotive LiDAR sensors to tech companies using a Mobility as a Service (MaaS) model.

Microvision bulls vs bears

The bullish case for Microvision is simple. The LiDAR technology created by it is reportedly smaller in size and cheaper than competitor offerings. Smaller is better when it comes to tech components, and cheaper is always better for buyers. In theory, it could level the playing field in autonomous car manufacturing if Microvision can pull this off and scale it. Of course, that’s easier said than done and there are no guarantees.

However, one notable user of its technology is reportedly Microsoft. The software giant won a $22bn contract with the US army to provide its HoloLens 2 mixed reality product to soldiers. The rumour that Microvision is a supplier for this tech was another reason for its recent share price rally.

Machine learning, AI and AR are all hot sectors for growth investors. But they’re still in the early stages of development with a lot to prove. The arguments for how this technology will change the world are compelling. But much of it is theoretical and therefore a gamble.

Microvision owns 55 patents with over 90 pending patents. But it also knows of several competitors that may challenge its patents, which could lead to costly legal battles.

Reading through the company’s 10-K shows a seemingly endless list of potential shareholder risks. It’s not pretty. The company is fully funded for the next 12 months. But has never been profitable (since 1993!) and will continue to incur significant losses this year. Therefore, this is a highly speculative investment. I’m not tempted to add Microvision shares to my portfolio.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Kirsteen has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Microsoft. The Motley Fool UK has recommended Intel and recommends the following options: long January 2023 $57 calls on Intel and short January 2023 $57 puts on Intel. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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