On Tuesday, Morgan Stanley analysts Brian Nowak and Adam Jonas released a note on several self-driving car companies’ valuation. Waymo came out on top, at $70 billion and potentially more, over firms like Tesla, Uber, Ford, and GM.
According to the report, Alphabet’s autonomous driving venture could be worth more than others due to its recent partnership with Lyft, which would have both companies benefit from tech testing in real streets and vehicles.
Waymo has made slow but steady progress, a feat all the more significant because it has crushed its competitors where it matters: test miles driven to optimize its technology before rollout. Analysts say the company could potentially spin off out the Alphabet group.
Why is Waymo worth so much in comparison with others?
When compared with other self-driving companies, Waymo might not seem like much of a competitor because it was not the first out of the gate like Tesla and Uber, who regularly make headlines for their progress.
However, the startup has been hard at work for almost a decade, roughly the same time Uber has been around. The approach over at Google, though, has been intensely focused on research and testing to launch a service that is ready to go and not the other way around.
Under this perspective, Waymo vehicles drove almost 636,000 miles on California public roads last year alone. This is over 1,000 times more miles than Ford and Tesla, according to a DMV report released late last year.
Analysts cited these strong foundations as well as the strategic partnerships in which the company has recently engaged. Its collaboration with Lyft could bring even more test miles to its already impressive count this year, and that’s without accounting for the free rides it announced last month in Phoenix:
“IF WE ASSUME THAT WAYMO CAN GROW TO ~1% OF GLOBAL MILES DRIVEN BY 2030 (BASED ON A FLEET OF ~3MN CARS EACH DRIVING ~65K MILES/YEAR) AND THAT WAYMO CAN GENERATE ON AVERAGE ~$1.25 IN REVENUE PER MILE DRIVEN, IT IMPLIES A ~$70BN WAYMO ENTERPRISE VALUE.”
Waymo become an independent company in the future, analysts say
Morgan Stanley researchers went on to say that if variables like miles driven per year and revenue per mile increased, then Waymo could quickly reach a valuation of $140 billion according to their estimates.
Alphabet, not wanting to constrain one of its Other Bets, might decide to let the company go if it deems it big enough that it can sustain itself. Other legal implications that might arise in the future could also drive the tech giant to distance itself from Waymo.
Self-driving technology legislation might come along with regulation and taxation of these vehicles. “Material Regulatory and (likely) legal risk” were among the reasons why analysts suggested Alphabet might let Waymo spin out on its own, that aside its “valuation opportunity.”
Source: Business Insider