China’s MicroCloud Hologram (NASDAQ:HOLO) is generating very low revenue, and its sales have declined sharply in recent quarters. What’s more, demand for its technology is unlikely to surge anytime soon. The firm has provided very little information about its customers and the outlook of its business. Given these points, I urge investors to sell HOLO stock.
Unimpressive Revenue and Dim Prospects
In the fourth quarter of 2023, MicroCloud’s top line came in at only $7.4 million. That was a meaningful decline compared to the $9.2 million it generated in the year-ago period. Similarly, in Q3 of 2023, it reported sales of $7.2 million. That is way below the $24.2 million of revenue that it managed to generate in Q3 of 2022. In other words, its business appears to be headed in the wrong direction.
MicroCloud says it is “one of the leading holographic digitalisation technology service providers in China.” It notes its technology can be used to develop advanced driver assistance systems (ADAS).
My research, though, suggests there is not a great deal of interest among automakers in using holographic technology to facilitate ADAS. After numerous good-faith searches, it appears automakers are not investing much money into the technology for this purpose.
Last year, four automakers invested $50 million in a company called Envisics which makes holographic displays for vehicles. However, only two companies — General Motors (NYSE:GM) and Jaguar Land Rover — were slated to incorporate the technology in any of their vehicles. I did find one other article about holographic technology in vehicles. The article noted that Hyundai (OTCMKTS:HYMTF) and several other automakers had displayed “Holographic augmented reality (AR) for vehicles” at the CES technology show in 2020. The AR, which provides alerts and “guidance” to drivers, does not appear to ever have been incorporated into any vehicles.
Moreover, holographic displays seem to constitute a relatively small component of ADAS, as they are primarily used to provide information and alerts to drivers.
Given the relatively low interest in holograms by automakers for ADAS and the fact that they are not a major component of ADAS, I’m not confident that MicroCloud will be able to generate much revenue from this
A Lack of Information
After extensively examining MicroCloud’s website, I could not find any information about its customers, or deals that it has made. I also did not see any indications that it has significant opportunities going forward.
However, Seeking Alpha did republish a November 2023 press release from the company which, for some reason, is not on its website. The release states that the company will provide a Generalized Streaming Media Control System for a major, unnamed Chinese automaker. Based on the information in the release, it appears that the automaker in question is BYD (OTC:BYDDF).
BYD is a hugely successful company as it sold 3 million vehicles in 2023. Still, MicroCloud did not specify how many of BYD’s vehicles would use its CMS. As a result, I would not be surprised if the firm is only providing CMS for a few thousand vehicles for testing.
Also, I know from years of reading about BlackBerry (NYSE:BB) that providing entertainment systems for vehicles is not particularly lucrative. Historically, BlackBerry has only received a few dollars per vehicle for providing automobiles’ entertainment systems.
Very Limited Institutional Ownership of HOLO Stock and the Bottom Line on MicroCloud
Another negative sign for MicroCloud is few institutional investors own the stock. At the end of last quarter, slightly less than 400,000 shares, or 6.7%, were owned by institutional investors. The largest investment in the company among institutions amounted to $500,000. The lack of interest in the name by large investors is another red flag for HOLO stock.
MicroCloud is generating very low sales and its revenue has dropped sharply over the last year. Moreover, there are no signs that the company’s fortunes can turn around anytime soon. As a consequence of these points, investors should sell HOLO stock.
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On the date of publication, Larry Ramer held a long position in BB. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.