Morgan Stanley Sees A $70 Billion Self-Driving Startup In Alphabet's Waymo
Waymo isn’t a household name yet but the unit created late last year to commercialize Google’s self-driving car tech could become a very valuable asset should parent Alphabet Inc. eventually spin it off as a standalone startup, worth $70 billion or more, according to a report by Morgan Stanley.
The assessment by analysts Brian Nowak and Adam Jonas was undertaken after a surprise announcement that Waymo and No. 2 U.S. rideshare company Lyft planned to collaborate on testing of self-driving systems on Lyft’s platform. If the companies ultimately work together, it would be a big revenue generator for Waymo under a scenario created by the analysts that assumes it could generate $1.25 per mile for the tech firm.
If vehicles with Waymo’s driverless hardware and software were to account for about 1 percent of vehicle miles traveled globally, that would create the $70 billion value the analysts foresee. Spokespeople at Mountain View, California-based Waymo didn’t immediately respond to calls on the matter. That future value could add about 12 percent to Google’s enterprise value and doesn’t appear to be currently factored in by investors, according to Nowak.
Neither Lyft nor Waymo have provided details on the scale of the program or cities in which vehicle testing will take place. Waymo currently sources Chrysler Pacifica Hybrid minivans from automaker FCA that tests in Silicon Valley, Seattle, Portland and Austin, Texas, and has racked up more than 3 million miles of on-road testing in autonomous mode and billions more simulated miles.
Last month Waymo announced the creation of a large-scale public test of its driverless vehicles in Phoenix that will be available for hundreds of residents. The company is also in talks to collaborate with Honda on self-driving car tech. It's also locked in a tough legal fight with Uber over claims a former Google engineer took stolen trade secrets with him when he joined that rideshare company.
(For more on how Waymo stacks up to competitors, see "Nvidia And Waymo Grab Early Lead In First Lap Of Self-Driving Car Race.")
Of the various companies tied to the Google X incubator program, Waymo is the most likely candidate to be spun off, owing to three factors cited by the analysts. “1) Its valuation opportunity; 2) it has graduated from Google X to a stand-alone entity; and 3) Waymo will likely face material regulatory and legal risk that GOOGL may not want to be directly exposed to.”
If the analysts are right and Waymo were achieve valuation in line with its revenue-generating potential, it would surpass publicly traded automotive market cap leaders General Motors, Tesla and Ford, which are worth $50.4 billion, $49.8 billion and $$44.9 billion as of Tuesday. It might also be worth more than privately held rival Uber, which currently is valued at about $50 billion, according to The Information.
Not surprisingly, Waymo also faces aggressive competition in perfecting autonomous driving systems for next-generation cars and trucks from all four of those companies and a great many more.
