Alphabet's Waymo could be worth over $200B, says DA Davidson

DA Davidson estimates Waymo's value at over $200 billion, using Tesla as a benchmark. The analysts argue that Waymo's autonomous driving stack has been validated and could generate $700 million in revenue by 2026. DA Davidson maintains a Neutral rating on Alphabet but suggests a breakup could unlock shareholder value, citing underperformance in Search, Cloud, and advertising.

In a recent note to clients, DA Davidson analysts have estimated that Alphabet Inc.'s (NASDAQ:GOOGL) Waymo unit could be worth more than $200 billion as a standalone company. The analysts used Tesla's current $1 trillion valuation as a benchmark to arrive at this figure [1].

DA Davidson's analysts cited Waymo's significant advancements in autonomous driving technology as a key factor in their valuation. They noted that Waymo has essentially validated its prior-heavy autonomous driving stack, now operating more than 1,500 cars in four U.S. cities. Furthermore, the analysts projected that Waymo could generate over $700 million in 2026 from a 3,500-vehicle fleet [1].

The analysts also argued that Waymo's approach, which is posterior-heavy, differs from Tesla's (NASDAQ:TSLA) posterior-heavy approach. They believe there is sufficient room for both companies to flourish in the autonomous driving market [1].

DA Davidson maintained a Neutral rating on Alphabet but suggested that a complete breakup of the company could unlock significant shareholder value. The analysts cited underperformance in Search, Cloud, and advertising relative to peers as a key reason for this recommendation [1].

The analysts noted that Alphabet's current multiple of 18x earnings could pressure the board to act, especially as underperformance in these areas continues. They added that every month GOOGL trades at 18x earnings, the imperative for a breakup will increase [1].

In related news, Waymo has unveiled plans to introduce a fully autonomous ride-hailing service in Dallas, Texas, US, by 2026, with preliminary testing already in progress [2]. Waymo has selected mobility solutions provider Avis Budget Group as its fleet operations partner in the city. The partnership aims to extend Waymo's services to additional cities over time.

These developments highlight the growing importance of autonomous vehicle technology in the mobility sector and the potential for significant market growth in the coming years.

References:
[1] https://www.investing.com/news/stock-market-news/waymo-may-be-worth-200b-using-tesla-as-benchmarkda-davidson-4170355
[2] https://finance.yahoo.com/news/waymo-launch-autonomous-ride-hailing-102318758.html