Despite a decline of nearly 10% from June 21 through June 25, MicroVision (NASDAQ:MVIS) remains a Reddit stock winner in 2021. As I write this article, MVIS stock is up over 178% for the year. It’s hard to argue that retail investors haven’t been successful. Their conviction — and short interest that sits around 17% — is lifting the stock. 

But that gain in MVIS stock has not come without volatility. And that volatility reflects the uncertainty of when MicroVision’s automotive lidar technology can be applied. When I wrote about MicroVision in April, I noted that many analysts believe it will be closer to 2030 by the time autonomous vehicles are a reality.  

In fact, MicroVision’s signature contract is with Microsoft (NASDAQ:MSFT) as an assist on its Hololens project. That’s not an insignificant accomplishment, but it’s not the same as an autonomous vehicle contract. And the primary catayst for MVIS stock is the prospect of lidar in self-driving vehicles. 

In my opinion, that puts MicroVision in a position where two things can be true at the same time. The company operates in a sector that has the potential for explosive growth in the next decade. However, investors have bid the stock up to levels that make it overvalued.  

Competing in a Crowded Field

MicroVision is a “pick-and-shovel” play in the electric vehicle (EV) sector. Demand for the company’s lidar technology will be evident long before autonomous vehicles become a reality. Normally, this would be a strong catalyst for a company’s stock. 

However, it brings the EV charging sector to my mind. Stocks such as ChargePoint (NYSE:CHPT) soared in late 2020. But then the bubble popped, and now CHPT stock is down 25% in 2021. This is partially because the sector is competitive, making it difficult for one company to stand out. 

I used ChargePoint as an example for one reason: The company is considered the undisputed leader in the charging sector based on market share. While MicroVision has proprietary technology, it’s not clear that the company is a leader among lidar companies pursuing the autonomous vehicle market.  

Is MicroVision Really a Leader? 

MicroVision’s lidar category leadership remains part of its bullish narrative. However, if MicroVision is being considered by autonomous vehicle manufacturers, it’s a closely held secret.  

And if the company enjoys a robust cash position, why would it need a $140 million at-the-market (ATM) equity agreement? Concerningly, MicroVision acknowledged it could be used for “general corporate purposes,” which may include working capital.

I understand that may be the smart thing for the company to do. But doesn’t that suggest it knows MVIS stock is overvalued?

Perhaps not. But it does show that MicroVision may not be a leader in lidar tech. It’s one thing to have proprietary technology, but it’s another thing to have market share. Although the company certainly has the former, it lacks the latter.  

Should You Take Profits on MVIS Stock?  

Certainly, one goal of investing is to make money. However, another goal is to ensure that you don’t lose money. That’s the risk-reward problem that plays out with a stock like MicroVision. MVIS stock has been boosted higher based on the conviction of bullish investors, not the company’s actual performance. That means now is likely a great time to take profits.  

However, if you’re still interested in MVIS stock, Chris Tyler sees a bullish pattern in the company’s chart. In his recent article, Tyler suggested a strategy that can help protect against losses.  

Thomas Yeung is an expert when it comes to finding fast-paced growth opportunities on Reddit. He recommended Dogecoin before it skyrocketed over 8,000%, Ripple before it flew up more than 480% and Cardano before it soared 460%. Now, in a new report, he’s naming 17 of his favorite Reddit penny stocks. Claim your FREE COPY here! 

On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. 

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for Investor Place since 2019.