PicoP vs 4K TV -- the value question

PicoP Will Outperform 4K

I've been watching the emergence of 4k with some interest. If my memory serves me, I saw a 4k TV the first time last fall. What is happening is very interesting, and gives me more confidence than ever about the future of PicoP. People will prefer portability over high-resolution.

Whenever I see 4K televisions displayed, I try to take a look. When I imagine one in my living room, I don't get all that excited about it. I haven't seen much of the content that I watch on a 4K TV yet.  I don't think it will particularly enhance the experience. (they play some trailers from "House of Cards") 

When I look at a 4K display of video content that is common now, I get frustrated. I'm sure it's because they flash to the next scene while I'm still absorbing detail from the picture. The 4K display shows more in a picture than I can absorb. The scenes progress from one to another faster than I can take them in.

When I see 4K pictures, I want to study the pictures - I'm not looking at it for the reasons I tune into regular video.

I watch video to see the story, to be involved in it, to be entertained, to laugh or learn. 4K doesn't enhance that.

The VALUE QUESTION -- why do I want a display?

4K Display Value

I want a display to see the CONTENT that is being presented to me. It doesn't have to dazzle me -- when I watch video I'm watching it to experience the story, it makes me laugh, it appeals to my emotions -- I'm not there to study the resolution of the display. I will gain little if anything from 4K resolution when I'm watching the kind of content I currently enjoy. 

If we change the kind of content, and show more still pictures, detailed information, and slow the scenes, I think 4K may gain some legs. When current filming techniques are used, I get frustrated - because I'm looking at additional details of a scene and it flashes to a new one.

PicoP Display Value

PicoP's value is in its portability. It's at the near sweet-spot for resolution -- we can see the content well, and enjoy the content for the reasons we enjoy it with an immersive "big screen" display -- with a portable pocket-sized package.

SHARED experience. The display from PicoP is big enough to have a shared media experience with others. We WANT that. 

Portability: We carry little computer/communication/media devices around with us. We like them a lot. More than a Billion of them are sold annually. PicoP is the portable accessory (currently) and future embedded solution that makes them significantly more valuable.

Bigger Screen, smaller device: There are two value criteria that mobile companies know Everyone wants a BIGGER screen with their portable device, and they also want the device that has it to be SMALLER. These are very inconsistent desires that are perfectly consistent when PicoP is available.

In my own home, I will use the PicoPro over my higher-resolution television if I'm more comfortable in a different place. Higher resolution isn't worth the 13 steps it takes to get from the comfort of my bed to the alternate comfort of my living room.

Ecosystem Readiness

4K ecosystem isn't ready.

The current state of 4K TV must be frustrating to 4K screen brands -- there is so little content for them that it makes little sense to purchase one unless the television you are using now breaks or is destroyed. It took a decade for traditional HDTV to come down in price this far. Yesterday at a Walmart, I saw a 20% price rollback on a 4K TV (amazing display, I must admit!). You don't discount things that are seeing huge demand, not by that much. There isn't even a player I could find that plays content in 4K or any media to play on one if you had it. I think I saw a DVD player (very expensive) that would up-scale traditional DVD media. I suspect trying to divide each pixel into four pieces and show it will cause some funky looking video.

PicoP ecosystem is ready to go.

Virtually every mobile phone sold now has screen-mirroring capabilities, either wireless or through mini-HDMI connections (and soon with USB-C).

Content is widely available -- people are "cutting the cord" and going with internet and mobile deliverable content.

Wireless Carriers are Ready: they are primed with advertising, and mobile content. ATT bought DirecTV for it's content and content delivery, Verizon purchased AOL for it's video advertising capabilities. (Verizon and ATT see Huge Opportunity for Mobile Video)

I think we're onto the sleeper investment of a lifetime.

technological leaps

MVIS Value -- By Comparable Market Cap: WhatsApp, GoPro, Groupon, Uber

Several times during the annual stockholder meeting the words "ridiculous valuations" was used. Mentioned specifically was offer Steve Ballmer made for the LA Clippers -- apparently about three times the price that a basketball team should command.

So, a question: What would a "ridiculous" valuation for Microvision be?

LA Clippers + Steve Ballmer

WhatsApp --- valuation: $19 Billion

First, what did Facebook actually pay for WhatsApp?

Facebook ( FB ) announced that it will acquire mobile messaging app WhatsApp for a whopping $16 billion, out of which $12 billion will be funded through stock and the remaining through cash. The deal also includes another $3 billion in restricted stock units. -- From Nasdaq $16 billion + 3 billion = $19 billion.

• WhatsApp Revenue Model
• Forbes, "value for many"
• Understanding WhatsApp's $16 Billion Price Tag -- from CNBC

Quotes from "Understanding WhatsApps $16 Billion Price Tag"
It's WhatsApp's scale that CEO Mark Zuckerberg is focused on – he predicts it'll hit 1 billion users in just a few years—and he says it'll be key to his vision for "connecting the world"
WhatsApp already has a business model and is generating revenue. It's free for the first year, then charges 99 cents annually.

Free for the first year, then .99/year. In the world of the free internet, it's probably likely that a significant number of users will create a new account after a year, and use it the second year for free. 

In April, they have about 500 million monthly active users. (That's a lot, no question.)

A billion users. $0.99/year/user -- that's their revenue model. -- that they'll all actually pay a dollar per year to use it is a large assumption.

Profit Margin: effectively 100%
Dubious Moat

GoPro --- Market Cap $5.33 Billion

Sells cool cameras. No question.

Their product costs a lot to produce. 

They have revenues, but they're still losing money.

Profit Margin: 5%

Moat is dubious

Groupon -- Market Cap $4.4 Billion

Loses money. (it shouldn't, but it does.)
Profit margin -- should be really high, but it isn't.
No Moat (If it's very difficult for someone else to duplicate your performance, you have a moat.)

Uber -- Valuation $17 Billion

CNBC on Uber Valuation

This is an interesting company, and there's some genius at work. They have a service that will likely give taxi services a run for their money. The concept could grow far beyond taxi services -- providing "nimble services" in other areas. What they don't have that Microvision owns is a huge moat. There isn't any way to provide a patent protection to this service, and to invest confidently in this, one would have to be confident that no one finds a better way to do the same job, or that there are few problems while riding with Uber. If the service continues, there eventually WILL be a fatal accident while riding with Uber, and how things fall out there will be interesting.

No Moat
Lots of risk
Profit Margin? Probably really high.

Comparing the companies:

Microvision has real value that exceeds these companies. No, they aren't selling product yet, but that is about to change with a vengeance. 

Microvision has real products to sell/license. If you want the product, you have to go to them, you're not going to be able to build your own or find a replacement - or open a new account so you can get the product free.

Competition: All of the above mentioned companies can experience severe competition. At the moment they all enjoy being a kind of default choice, but each has considerable vulnerability. Creating new software is done all the time. In the case of GoPro, many companies are imitating them, coming up with smaller and more durable cameras. Microvision, on the other hand has a product, with very significant patent protection. Other companies are producing small projectors, that is true, but for those of us who have tried to see as much of the competition as possible -- the competition is lame by comparison. There is no comparison - Microvision outclasses them all.

Market potential:

All of the companies considered have world-wide market potential.

WhatsApp: a lot of people use texting, and they have a significant user base now. That's good. A whole lot of people in the financial world never heard about Whatsapp until Facebook made a bid for it.

GoPro: Their cameras are cool, no question. What percentage of the people in general need hardened cameras that work while they do crazy things? Not a high percentage.

Groupon: Sure this is an excellent service. They have the means to make money. The number of people who go out to eat on a regular basis is large, can they grow? Absolutely.

Uber: Another excellent service idea. However outside of urban areas, and away from large airports, taxi service isn't that common. This could make riding in other cars more common, and it could certainly grow.

Microvision: Nearly a billion smartphones are sold annually. Nearly every person on earth consumes media in the form of moving pictures. Microvision has a better, more portable and less expensive way to do this. (that uses significantly less power). Among the very large populations in urban areas where it is difficult to keep big things, Microvision can provide a gigantic screen experience, from a very small package. In rural & undeveloped areas where it's difficult to get power, and difficult to transport large fragile things, PicoP could make media available to people who are currently unable to get it. In suburban areas, teenagers want to carry this around, and will.

Look at the company and not the financials to make your decision. Which one is worth more?

Comparing Market Capitalization.

Company	Market Cap	MVIS Price At that Market Cap
WhatsApp	19,000,000,000	$441.86
GoPro	5,330,000,000	$123.95
Groupon	4,400,000,000	$102.33
Uber	17,000,000,000	$395.35

What is Microvision Worth? Doing the Math

By potential Earnings:

The Math:

We need some information to do the math, and we do have to guess on some of the information, but we can be conservative, and show samples to come up with reasonable estimates.

First we need earnings per share, which we'll calculate like this:

(Earnings per engine)*(Engines sold)  / (All MVIS shares) = Earnings per share

Earnings per engine: $10. A question was asked at the ASM, and the answer gives us a hint that the earnings per engine could be as high as $30, but it will probably be $17. To be conservative, $10.

Engines Sold: 10,000,000 

I will use a 10 million units sold threshold. It's arbitrary, but I have two data points as my reasons:

Sony statement of 10 million DGL demand for 2014 Reference Link

Apple sold 9 million iPhone 5s & c models in one weekend link 

(I know it's arbitrary, but this is an indicator of the kind of demand that can exist for a new electronic gadget, and the iPhone 5s released had dubious distinction from the previous iPhone5)

It is entirely possible that Microvision will produce and sell 10 million PicoP engines by this time next year.

All MVIS Shares: 43,000,000 Look next to "Shares outstanding"

Do Math: Earnings = $2.33/ Share

Price to Earnings Ratio:

Arriving at a price to earnings ratio is not easy. There are a lot of factors that play into what the public is willing to pay for the earnings of a company. Those of us who have seen the prototypes know that this product could be insanely popular. ( I think it could make 50% of televisions & computer screens obsolete. I think it could be easily included in 50% of cellphones... more on that later.)

But the best way to come up with a PE ratio is to compare and go conservative.

(Earnings per Share)*(Price to earnings Ratio) = (share price)

The following is compared to the PE ratios of other companies found in a screen of stocks. Other than Solera, which I chose because it is the highest PE I could find, the others are mostly familiar companies. Safeway is a grocery store chain -- trading at a PE of 170! The @10 million units column would be the price of MVIS at $2.33/share earnings with the same PE.

I found that a reasonable PE ratio target of 80 gives us a decent (and conservative!) price target of $186 for ten million units of sales, but as is obvious here, the PE ratio could be (and probably will be, significantly higher.)

Stock	PE	@10 million Units
Solera	6882	$16,004.65
Amazon	527	$1,225.58
Skullcandy	382	$888.37
Dreamworks	339	$788.37
RFMD	247	$574.42
Checkpoint	203	$472.09
HomeAway	192	$446.51
Netflix	177	$411.63
Safeway	170	$395.35
Reasonable	80	$186.05

Market cap at $186/share? About 8 billion. Which, considering the sale price of other companies in the tech space, is very reasonable for a technology like Microvision's PicoP.

Total Market penetration:

The target arrived at above, is at ten million units sold.

In 2013, nearly a billion smartphones were sold world-wide. (967,775) Link

The PicoP could be sold for many more applications that just smartphones, but they are an interesting and contained market, and embedded cellphone applications are the "holy grail" of the PicoP marketplace.

There will certainly be competition for the PicoP. They won't be in every cellphone produced, but they could be in a lot of them. 

Trying to account for every other market that could include PicoP would be very difficult. Millions of handheld games, tablets, laptop computers, automobiles, etc. are sold that could easily and beneficially include PicoP for customer benefit.

So, I have as a market size target 10% of smartphone sales world wide. I believe this to be reasonable. This kind of market size would take some time to achieve.

If we take the same earnings per engine & the same number of shares of MVIS and 10% of the smartphone market. Total company earnings would equal $960,000,000. Earnings per share would equal $22.33

and the same PE ratios, we then end up with price targets like this: 

Microvision @ $1,786 /share?

Stock	PE	10% smart phone sales
Solera	6882	$153,644.65
Amazon	527	$11,765.58
Skullcandy	382	$8,528.37
Dreamworks	339	$7,568.37
RFMD	247	$5,514.42
Checkpoint	203	$4,532.09
HomeAway	192	$4,286.51
Netflix	177	$3,951.63
Safeway	170	$3,795.35
Reasonable	80	$1,786.05