MicroVision announces news! No, really. This time with numbers! Surely its stock (MVIS) will react. It certainly did last February. Surely October will be no different. Except it was. The life of small companies and small stocks are irrational, or at least chaotic. Individual investors must try to make sense of the news from their perspective. Easy or not, it is rarely conclusive.
Check back through my blog. In February 2014, a news item took MVIS from about $1.40 to about $2.80 in a day. MicroVision was working with Sony. Nice. A big name company validated MicroVision. Years of waiting were vindicated and the market rushed in. And then drifted back out.
Waffle words, revenue payments which were large, but not large enough, and great gaps in which no words were spoken meant expectations dwindled and faded over the months. MVIS stumbled back down about $1.80. The discussion boards fill the gap with speculation, but the market doesn’t want to speculate on the stock.
Today’s news was encouraging. The company is still not allowed to mention Sony by name, as bizarre as that is, but this time there was a definitive payment amount mentioned in the press release. No need for speculations. There was a need to meet greater expectations though, and the stock fell on the good news.
Every MVIS investor gets to interpret the news from their perspective. Each perspective is unique, which is why the discussions never end. Here’s my interpretation of the news.
The press release.
MicroVision, Inc. (MVIS), a leader in innovative ultra-miniature projection display technology, today announced it has entered into an agreement valued at $1.5 million with its Fortune Global 100 customer for display module support services.
MicroVision recently announced successful completion of development work under an April 2013 agreement. The company and its customer will now transition to focusing on commercialization activities that are expected to span several phases including production readiness, initial production and market launch for the display module.
“We are pleased to provide continued support to our Fortune Global 100 customer as we work together to bring the display module incorporating PicoP® display technology to market,” said Alexander Tokman, president and CEO of MicroVision.
Here’s how I parse the information.
- “MicroVision, Inc. (MVIS), a leader” Being A leader isn’t as strong as being The leader. While it may be a bit of wordsmithing, even a small company like MicroVision is worth tens of millions of dollars. Every word that can change the public perception by 1% is affecting the company’s value by hundreds of thousands of dollars. Of course, maybe they don’t see themselves as being The leader.
- “entered into an agreement” is good news, but Entered is not Completed; which means backlog increases, which is good; but the work and potentially the payments come later.
- $1.5 million is good news. It isn’t however enough to make the company profitable. It is on the same order as my estimate for the total pay for key executives. Regardless, it is money, it has value, and that value should be reflected in an update to the company’s valuation. For a Price/Sales = 6, the market cap should increase by $9M. For a Price/Earnings = 20 (assuming services are all profit, which they are not), the market cap should increase by $30M. The current market cap is about $75M, so there is logic to suggest the stock could’ve risen by 12% – 40% from my perspective.
- “Fortune Global 100 customer” = Sony, with a high degree of certainty; which is good news because it means a significant customer came back for more.
- “Support Services” = Services are not products, so there’s no way to know how many units are involved. It is business, but the major necessary revenues for MicroVision will probably be from licensing fees, royalties, and sales. At least, that’s what I gathered from the stockholders meeting.
- “recently announced successful completion of development work” = Old news, therefore, no change in valuations.
- “now transition to focusing on commercialization activities” = I thought they were already doing that. From some interpretations, commercialization, i.e. product launch and sales, were likely to commence in time for the 2014 holiday shopping season that is less than four weeks away.
- “production readiness” = Suggests they are not not already in production, not even for an early 2015 product launch.
- “initial production” = Confirms above.
- “market launch” = Not a surprise, but there was that expectation that this holiday season would see such an event. Considering the production comments, it sounds like MVIS success is the seemingly permanent 6-9 months away.
Here’s how the market parsed the information.
- MVIS drops $0.03 = Not a surprise.
Nothing else about the market is definitive because the market is not one thing; the market is an unorganized herd of conflicting motivations, incentives, and resources. Collectively though, they were underwhelmed by the $1.5M news even though they’d cheered early 2014’s $1.7M news.
Making sense of investing is never a completed task, because the markets continue to change. In the last 15 years the markets, the members of the investing community, have reacting to the Internet Boom and Bust, 9/11, The Great Recession, and lots of lingering unease. The logistics have changed dramatically, with far more computer influence now than then. The world has changed.
Some basic investing tools have not changed. In this case, parsing a press release continues to be the careful dissection of the phrases; seeing each as a piece of logic to be taken at face value first and interpreted later.
MVIS was not buoyed by the news. The next press release could already be scheduled as I type. Whether the good news is that close to good news or not, at this point I step back and re-collect the pieces. The company is making progress. They are getting paid for the progress by a returning customer, that customer has the potential to make very large deals, and that customer is not alone because MicroVision has several others that are quieter. I hadn’t expected MVIS to go up 40% on a $1.5M deal; but I take the drop as a sign that market is irrational, ignorant, or quietly aware of something I’m not. Yet, so it goes. That’s MVIS’ insufficient news, for now.