IOT - Price Calculator

More than one request has been made for a price target calculator that includes smart speakers. (or for specifically smart speakers.)

This would be primarily to see the market potential of MicroVision's Interactive display.

There aren't many years of data to establish any kind of trend of only smart speakers, which makes this kind of thing problematic.

It's also too limiting. 

Many of the devices in the "Internet of things" are going to be excellent places for interactive displays: Like the smart thermostat as an example. What used to be a coil of metal with a mercury switch now has the brains of a high-end 1990's PC -- and when you can crunch that much data, it begs for a display. When you have that much intelligence on a thermostat, you can connect it to your calendar, program your days off, or set up profiles for events. Some way of programming this remotely may be common, but a way to adjust it at the source would be very useful, and desirable.

How big is the internet of things going to get? It's going to get probably gigantic, and where it goes is anyone's guess. There are a lot of strange connected devices, and nearly anything that is connected might be wanting for a screen & controller. Easier to design and manufacture than adding buttons, and complex button patterns. (Short list from the linked article: Toothbrush, flip-flops, luggage, camera for dogs, salt shaker, umbrellas, trash cans, mirror, condom(yes, sorry), toaster, liquor decanter, wine bottle, fork, etc.

Ikea is going to be launching smart blinds -- I think smart blinds are going to be very popular soon, because they could help regulate the temperature in a home, save energy, and make a place more livable.

If we take Gartner's numbers and assume that we're going to add 12 Billion smart devices in the next year.... and we get 1% adoption of smart displays in those 12 billion devices -- that could be 120 million interactive laser displays in use.

If half of them are "smart speakers" and adoption is stronger than 1% of those, the number could be much higher.

Interesting new things could appear from nowhere -- remember the smart speaker, is a very new product category, and all of a sudden everyone seems to be competing in the space. 


ZDNET

Big and getting bigger -- there are already more connected things than people in the world. Analyst Gartner calculates that around 8.4 billion IoT devices were in use in 2017, up 31 percent from 2016, and this will likely reach 20.4 billion by 2020. Total spending on IoT endpoints and services will reach almost $2tn in 2017, with two-thirds of those devices found in China, North America and Western Europe, said Gartner.

Out of that 8.4 billion devices, more than half will be consumer products like smart TVs and smart speakers. The most-used enterprise IoT devices will be smart electric meters and commercial security cameras, according to Gartner.

Market Treatment of High Growth

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.

Screen shortage in India

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.

$7.2/48.5 = .15 (Earnings / shares outstanding = Earnings per share)

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.)

*Older price estimate
*Valuations

Various Price Targets

I will update this as I find more, but thought it would be good to compile some price targets of Microvision. Some are my own. 

If you submit your own price target or know of a publicly listed price target, please comment.



My quick rough estimate is based on the following formula. 

(10% of previous years worldwide smartphone sales * Likely income/unit) / Float @ P/E of 80.

Last years smart-phone sales: 1,200,000,000  (Reference)
Likely income/unit $12 (based on a non-explicit comment at Stockholder meeting "educated guess")
Shares outstanding: 44,500,000 (Adjust this as the number changes)
PE ratio of 80 (moderate PE ratio for a growth company.)

you do the math...

Previously Here:

Oculus Market Cap Comparison

What is Microvision Worth?


From TrimbathCreative

As I've described before, my rule of thumb for estimating the value of a deal is a price to sales ratio of 6. Based on that, MicroVision's market cap should be worth an extra $87M; which would have been about an 85% increase in MVIS. Adding in the previous $8M deal and the market cap is $135M, about 10% below the closing market cap. That valuation assumes zero value from any of the other possibilities. I don't place a zero value on those possibilities.

Market Capitalization Comparison: Oculus Rift

Price targets & ultimate valuations of the company and the stock.

Today's comparison: Oculus Rift.

Bought by Facebook for 2 Billion dollars.

MicroVision shares at 2 Billion: $44.94

Comparison to PicoP:

Both are display technologies. Oculus Rift is designed primarily for gamers. It does not allow (yet) interaction with the real world at the same time as with the image it generates.

PicoP technology allows large screen projection nearly anywhere. This technology enables a big screen display in your pocket.

Simplified Market size potential. 

I'm using a "simplified market size potential." There's great interest in keeping comparisons simple & meaningful. If we see all the details, we'd probably get lost in them.

Oculus: assume they sell one for EVERY game console sold: 11,500,000 (4/13-4/14)
PicoP: assume they sell to 10% of of smart phones sold: 130,000,000 (2014)

That would be market potential for PicoP technology 11.3 times more units than Oculus Rift.

MicroVision shares at 11.3 times Oculus: $507.86

Companies WILL pay for future earnings.  

This is why I have bought MicroVision stock and WILL be holding it.

Reference links:
Oculus Rift purchased by Facebook
Oculus VR
Game Console Sales 2013-2014

2,000,000,000 / 44,500,000 = 44.94

Oculus to Ship in early 2016 (new york times blogs)

Market is Gigantic - and Growing

1.25 Billion Smartphones to ship in 2014

2 Billion Smartphones to ship in 2018

The market is Gigantic. Even if Microvision manages to sell to only a small portion of it, the income potential for Microvision is staggering. I'll have to adjust estimates here upward.

London, United Kingdom - 09 Jul 2014    Link

ABI Research expects 1.25 billion smartphones to ship in 2014 and forecasts smartphone shipments to pass the 2 billion mark in 2018. The compound annual growth rate (CAGR) over the forecast period from 2014 to 2019 is 12%.

“While smartphone growth is beginning to fall, plenty of growth remains, with smartphone penetration of mobile subscribers under 30% worldwide,” commented Nick Spencer, senior practice director, ABI Research. “Most advanced and affluent markets already have 60%+ penetration, so the growth is driven by developing markets and the reduction in smartphone ASPs.”

Smartphones will consolidate their lead as the largest computing category, more than doubling that of its nearest rival in 2017. Growth is being driven by Chinese and Indian smartphone manufacturers, creating low-cost Android or AOSP devices for markets in Africa, Asia, the Middle East and Latin America.

These findings are part of ABI Research’s Smartphones and Handsets Market Research, which includes Research Analyses, Market Data, Insights, and Competitive Assessments.

ABI Research provides in-depth analysis and quantitative forecasting of trends in global connectivity and other emerging technologies. From offices in North America, Europe and Asia, ABI Research’s worldwide team of experts advises thousands of decision makers through 70+ research and advisory services. Est. 1990. For more information visit www.abiresearch.com, or call +1.516.624.2500.