I try to remain a "big-picture" guy. Rather than worry about details or the next conference call, I look at whether or not the bet I'm making is a worthy bet. If the big picture makes sense, the bumps in the road are simply bumps in the road. A new product having a slower than wished for release, or a supply-chain hiccup is just a new product having growing pains. All new products have them, we only notice them on the new products we care about and pay attention to. Tablet computers have been out for only a few years. The iPad was first, and it was released in 2010 to laughter. The immediate reception by most people was -- wrong. I must admit I was dismissive at first -- but this taught us something about the electronics market that we need to pay close attention to now. The negative reception to the iPad came from a couple of things: It was a poor replacement for a laptop (missing the lap top computer crowd). It was too big to be as portable as the iPhone. (misses the phone people.) Steve Jobs himself said that no one would buy a big phone. He was wrong. He was wrong, because they wanted a bigger screen -- and the only way to get a bigger screen was to make a bigger phone.
This picture --- taken in my home in a dim room, on a white wall. My phone is at the bottom, the projected image from a Celluon PicoAir surrounds it. This is the kind of "larger screen" possible with PicoP. Carrying around this screen? EASY. Put it in your pocket, take it out when you need it.
There are two things that the mobile user wants and is willing to go out of their way to pay for: more portability -- a smaller form factor -- and a bigger screen.This single fact can eliminate nearly all doubt about this product's potential for success. More portability and larger screen size are in conflict until you get PicoP. With PicoP, you can put a big screen in your pocket. There are other portable projectors, but their power consumption, contrast ratios and required focus wheels render them impractical for truly portable operation. Which means, ultimately, that mobile companies have to use PicoP. It's the best solution. What's the size of the market? 1.4 BILLION smartphones were sold last year. I remember working potential numbers with a friend once, and asked, so, how many of the smartphones in the world do you think will get this. "ALL of them" was his quick answer. People who see this, think it's going to be all of them -- or at least most of them. I've run my price target estimations based on 10% of cellphones, and the price target for this stock gets so high it seems like it might be crazy. Granted there are some guesses in that calculation, but they're educated guesses. (Valuations Page) Is MicroVision positioned for growth? Partnering with two companies who make components for smart phones around the world, is a great place to be. Stay focused on the big picture. We're very close.
As this is being written, Fitbit is trading at a price/earnings ratio of 90.94 and a market capitalization of 8.73 billion dollars. Fitbit is an interesting comparison for MicroVision, much like GoPro is. These are both companies that sell consumer electronics devices. There is probably a lot of market overlap between the Fitbit audience and the GoPro audience. The PicoP audience covers ALL of their audience and all of the couch potatoes as well. With the CDC reporting that 80% of US citizens aren't getting enough exercise, the Fitbit audience is limited - unless you believe that a lot of people are interested in discovering and monitoring how unfit they are. We could do a lot of guessing about how much market share is possible for each product, but ask yourself these two questions:
1) how many people do you think are worried about getting a spreadsheet of their daily heart rate and maybe having a contest with their friends
2) how many people do you think are interested in sharing pictures, viewing video or playing games?
Who wants to carry a big-screen TV in their pocket? Why MicroVision?
I happen to think that the size of the market represented in #2 is FAR larger than the market represented in #1.
The market cap for Fitbit - which represents market #1 - is $8,730,000,000. Fitbit also has significant competition. MicroVision is currently grossly undervalued. I firmly believe that if MicroVision were an IPO now, it would get a similar market valuation. If MicroVision had Fitbit's market cap: Microvision shares would be trading at a decently valued $180/share.
What CAN happen in a market. This isn't a prediction. It's all my opinion, you decide whether to take it or leave it. It is perhaps a study of why it may be foolish to make predictions. As we get closer to product releases, considering what might happen with MicroVision shares, the "how high could they go?" question gets more and more difficult to answer. I'm sure the shares will go higher. I'm sure the product will get vast public appeal. (EVERYONE I've showed the PicoAir to has wanted it. Not most of the people - EVERYONE.) I really enjoy using it, and I know that in the US... this is a cool toy, elsewhere, much more than that.
In China, Malaysia and India, PicoP technology will be a way for regular people to enjoy media how rich people in the US do. And in India the need for PicoP is huge.
SO, what happens when the investing public's imagination catches fire about a product or anything that grows quickly?
The stock price goes insane. I like to be conservative with estimates, but what if the other investors who find this aren't conservative. (If you're reading this close to its publication date, you are WAY ahead of the normal investor -- PicoP, at this point is almost totally unknown.)
Shake Shack Shake Shack is a recent IPO. People like their food. Investors like their stock -- probably a little too much. As of 5/26/2015 at noon eastern time, SHAK is trading at 85.45 with a Price/earnings ratio of 1,225. For each dollar of SHAK earnings, investors are paying $1,225.*
To make this further understandable, Shake Shak has 63 locations. If we divide their market capitalization (3.01 Billion) into those 63 location, we have the value of each restaurant. Each restaurant is [over]valued by the market at 47.7 MILLION dollars. Clearly, the market has exceedingly high hopes for this restaurant chain.
Transfer So, if a similar situation happened with MicroVision... I'll assume that MicroVision has medium market penetration success, and the same kind of market success that Shake Shack has had... (just to be clear, I'm not suggesting that this will happen, but it can happen, and as an investor, watching for this to happen is a good thing. If the price gets this crazy, the market will have given you a nice opportunity to sell some of your shares at a peak.)
For my exercise I'll assume that during the next year MicroVision collects royalties on 2 million PicoP licenses. My own estimates have been that MicroVision will ultimately collect $12/unit. Further, I'll assume that the cost of goods sold is 40% of that. (Cost of goods on the parts that MVIS provides is 60% -- I am assuming 40% -- AFTER royalty payments -- which could be considered conservative.)
Assuming that MicroVision earns $12/engine. They pay for the cost of the goods, and their standard cash-burn rate. MicroVision ends up with a $7.2 million annual profit. ($12 million is cash burn & 60% of the remaining 12 million is 7.2 million. ) There are 48.5 million shares of MicroVision outstanding.
At a normal PE range for a growth company (60-80*earnings) the price range to expect there would be between ($9 - $12/share)
What happens if it hits the public imagination like Shake Shack?
.15 * 1,225 = $183.75/share Do I expect this to happen? No. CAN it happen? Absolutely.
For fun, I'll run the numbers at a major CE product number: ten million
10,000,000 - 1,000,000 (Standard burn rate) (9,000,000 * 12) * .6 = 64,800,000 64,800,000/48,500,000 = $1.34 $1.34 * 1,225 = $1,641 *(At the same time, investors in Apple are paying $16.23 per dollar of Apple earnings, or $14.06 per dollar of Caterpillar earnings.)
