Waymo could be a $250 billion win for Alphabet, Jefferies says
- Waymo, the autonomous-driving technology company, could prove to be a huge boon for Alphabet, Jefferies analysts wrote in a research note out Wednesday.
- Google's parent company, Alphabet, spun off Waymo in 2016.
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"Can Waymo Drive Alphabet's Stock?" Jefferies equity analysts wondered in a research note to clients Wednesday.
It certainly could, the analysts concluded in a sweeping report that examined the self-driving company's impact on the Google-parent Alphabet.
Jefferies upped its long-term value estimate for Waymo to $250 billion (from a previously forecasted range of $75 to $125 billion). That's a notable price tag, compared to Alphabet's current market capitalization of $730 billion.
"Waymo is exploring many different business models, and our new estimate encompasses not only AV technology sale, but also transport services (people, goods/foods, commercial freight), ongoing AV tech support, incar services (advertising/marketing, entertainment, business), and new types of vehicles," the analysts, led by Brent Thill, wrote, referring to the autonomous-vehicle technology.
Accordingly, Jefferies said it would change its methodology in evaluating Waymo to a "revenue per mile monetization model," from an "upfront per vehicle value model." Their forecasts for Waymo's growth take into consideration the many concerns that still surround Waymo and self-driving technology more broadly.
"Questions linger around timeline, as influenced by AV tech progress, regulations, cost, and consumer concerns," Jefferies wrote, citing cities and states taking a cautious approach to allowing autonomous driving.
Still, the California-based company has appeared to progress this year. Waymo was planning to launch its first commercial rides as soon as this month, in Phoenix, Arizona, Bloomberg reported in November, citing a person familiar with the matter. And back in October, Waymo became the first company to receive permission to test unmanned, self-driving cars in California.
Other Wall Street firms have analyzed Waymo's impact on Alphabet. Earlier this year, Morgan Stanley upped its own expectations for Waymo's valuation, taking it to $175 billion from $75 billion.
And while the valuations are eye-popping, analysts note autonomous vehicles still have a long road ahead.
In a report earlier this month, UBS auto analyst Colin Langan wrote that even though Waymo had just launched its commercial autonomous car service outside of Phoenix, Arizona, the MIT professors that the firm met with believe it will be a decade before "scale AV applications in complex urban environments become commonplace."
Alphabet shares have tumbled nearly 18% from the stock's all-time high hit in July.
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