• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Daily Swing Trade Archive
    • Income Seeker
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

Waymo Offers Way More Upside to Alphabet Stock Long Term

Waymo could be the biggest value driver on Google's books.
By KEVIN CURRAN
Feb 04, 2019 | 01:31 PM EST
Stocks quotes in this article: GOOGL, GM

Alphabet's s (GOOGL) autonomous driving "moonshot" could be a key driver of share growth in the long term.

Shares of the Mountain View-based company were higher ahead of a fourth quarter earnings report to be released after today's market close. However, the positivity today could be a pittance compared to the company's Waymo self-driving effort.

"We believe that while Search and digital ad dominance is what will carry shares in the near-to-midterm, longer term it is the company's artificial intelligence (AI) "moat" that will provide for new avenues of growth," the Action Alerts PLUS team noted. "AI is what has made the company's Search, Video (YouTube) and targeted ad capabilities best-in-class and is the driving force behind the company's success in voice (Google Home) and autonomous driving (Waymo)."

The effort in Waymo is one that has certainly come into focus, as the long-term effort could add tens of billions to the company's already hefty valuation.

"We revise our Waymo model for three emerging business models - ride sharing, logistics, licensing - and increase our enterprise value from $75 billion (ride sharing only) to $175 billion," Morgan Stanley analyst Brian Nowak wrote in a note late in 2018. "Waymo could address roughly 80% of the $3.1trln global freight transportation market and evolve into a logistics player for long-haul and last-mile delivery."

The large valuation could certainly be justified, especially as Uber looks set to become the biggest IPO in history at a reported value of $120 billion for ride sharing alone. With the addition of logistics and supply chain services, the valuation should reasonably be expected to surpass Uber.

This is especially so as self-driving cars are an inevitability according to Action Alerts PLUS analyst Zev Fima. "We ultimately came to the conclusion that while it will take time, we will all be riding around in autonomous vehicles eventually," he wrote in a white paper on the subject. "It may start with those who need it at first, perhaps because they are simply more willing to take the risk of being first in exchange for increased independence. But in time, we believe that everyone will find a reason to own one."

The concerns reported in Gallup polls on consumer trust of self-driving cars could also be assuaged soon enough, accelerating the timeline expected by Fima.

Reports submitted to the California Department of Motor Vehicles by self-driving vehicle manufacturers during 2017 indicate that autonomous vehicles often require "disengagements," or a need for a human driver take over from automated systems.

According to the report, Waymo had the lowest disengagement rate, touting 63 interventions over 352,545 miles, or one per 5,600 miles. By comparison, GM's (GM) Cruise had over 100 disengagements despite traveling only 131,675.9 miles, or about 37% of the miles traveled by Google's vehicles.

If Waymo can maintain its lead in reliability and safety, it will be able to maintain a lead in consumer, and regulator, trust.

Given the early stages of the effort, the opportunity offered by Waymo has largely been left out of Alphabet's valuation. That could prove a key buying thesis for those bullish on autonomous driving.

"It is still early overall for Waymo but continued emphasis on operations and deployment, along with the planned launch of the ride-hailing program in Arizona in 2018, puts it on a clearer path to monetization," JP Morgan analyst Doug Anmuth said. "We believe the value of Waymo is underrepresented in Alphabet's current share price."

Comments on the program will certainly be key for longer term investors as CEO Sundar Pichai and CFO Ruth Porat outline Alphabet's outlook this evening.

Tonight's call is expected to follow an earnings release after market-close and will be available for streaming here.

(Alphabet is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells GOOGL? Learn more now.)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are restricted from trading individual securities.

TAGS: Earnings | Investing | Stocks | Automotive | Software & Services | Technology | Transportation | Analyst Actions | Stock of the Day

More from Stocks

Random Gleanings: Nike, Tesla, Boeing and Wells Fargo

Jim Collins
Feb 21, 2019 2:54 PM EST

One wonders where Nike's cool factor will come from.

KLA-Tencor Stock Could Break Out to New Highs

Bruce Kamich
Feb 21, 2019 2:06 PM EST

KLAC bears watching, with the semiconductor equipment name heading up the charts.

No Reason to Bail on Nike After Basketball Sneaker Blunder

Kevin Curran
Feb 21, 2019 1:39 PM EST

Analysts and investors aren't overly concerned about Nike's Duke debacle.

Which Way Will Wayfair Go in the Near-Term?

Bruce Kamich
Feb 21, 2019 1:13 PM EST

Wayfair's stock price has risen sharply in 2019, as it prepares to report quarterly earnings Friday.

There's No Reason to Blow Last Night's Duke-Nike Story Out of Proportion

Timothy Collins
Feb 21, 2019 11:11 AM EST

I'm more interested in how NKE continues to perform in China along with the current technical picture on the weekly chart.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:48 AM EST BOB LANG

    Making a Case for Microsoft and Snap

    Mr Softy has long been a laggard and late to the p...
  • 11:27 AM EST BOB LANG

    Added Some Dexcom

    This company reports tonight, the chart/technicals...
  • 10:08 AM EST KEVIN CURRAN

    Nike Options Action Spikes

    Nike options volume is surging as speculators pi...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2019 TheStreet, Inc., 14 Wall Street, 15th Fl, NY, NY 10005

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login