Most investors rightfully consider Alphabet Inc (Nasdaq: GOOG, GOOGL) a tech company above all else. However, Alphabet’s autonomous vehicle subsidiary Waymo may be approaching a value that puts it in the same class as some of the largest auto companies in the world.
According to Bank of America analyst Justin Post, Waymo’s recently announced ride-hailing partnerships with Jaguar Land Rover and Fiat Chrysler Automobiles ( FCAU) indicate that Waymo’s growth is accelerating. Waymo also has partnerships with Lyft, Intel Corp. ( INTC) and AutoNation.
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In November, Waymo became the first company to begin operating completely autonomous vehicles on public roads without human backup drivers in the front seat as part of its Early Rider test program. Post says Waymo driverless vehicles have now logged more than 4 million test miles on public roads.
“With the Early Rider test now underway in Phoenix, a pick-up in recent partnerships and supplier agreements, and Level 4 autonomous driving achieved in 10/17, momentum appears to be gaining steam with Waymo,” Post says.
In January, Navigant Research ranked Waymo and General Motors Co. ( GM) as the top two AV investment opportunities in the market today.
“While still early to determine true Waymo earnings potential, we established a potential $41 billion valuation in our recent sum-of-the-parts analysis based on a ride-sharing business and tech licensing model,” Post says.
If Post’s estimate is correct, Waymo’s $41 billion valuation puts it in the same class as Ford Motor Co. ( F), which has a market capitalization of about $43 billion.
Post’s valuation estimate for Waymo may actually be on the conservative side. Last year, Morgan Stanley analyst Adam Jonas estimated that Waymo could eventually be valued at between $70 billion and $140 billion if Alphabet chooses to spin it off into its own company.
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Jonas’ projections were based on Waymo getting 3 million fully autonomous vehicles on the road by 2030 and accounting for roughly 1 percent of all global highway miles traveled by that time.
Post says greater visibility into progress and projections at Waymo in coming quarters could also lead to earnings multiple expansion for Alphabet stock.
Bank of America has a “buy” rating and $1,360 price target for GOOG stock.
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Waymo May Be Worth More Than Alphabet Inc (GOOG, GOOGL) Investors Know originally appeared on usnews.com
