Wall Street is eagerly awaiting Tesla’s (NASDAQ:TSLA) August 8 Robotaxi Day to find out what Musk and Co have been cooking on the autonomous driving front, but all the attention on AVs (autonomous vehicles) could also be an opportunity for other companies to exhibit their own prowess in the field.
More specifically, Bank of America’s Justin Post, an analyst ranked in the top 1% of Street stock experts, thinks Alphabet’s (NASDAQ:GOOGL) Waymo endeavors could once again come under the spotlight and show how it is a leader in the AV segment.
There was once quite a buzz about Waymo, but the 5-star analyst concedes that over the years interest has waned. “Our focus on Waymo increased in 2017 following the Phoenix rollout, though we (and the Street) dramatically overestimated the pace of rollout,” Post said. “Since 2018 investor interest in Waymo, and the company’s contribution to Alphabet’s valuation has faded.”
But that’s not to say the company has not made progress in the interim. Waymo leads in Level 4 AV miles driven in the US, has made significant strides toward commercializing its AV fleet, and has a notable presence in San Francisco with around 250 cars. Apart from operating in Phoenix and San Francisco, it also has a presence in LA, with plans of expanding in California and launching in Austin.
As of May 24, 50,000 paid trips were being completed a week, a significant increase on the estimated run rate of approximately 15,000/week during all of 2023. Based on the assumption Waymo can continue to grow trips this year, Post reckons 2024 revenues will hit the range between $50-75 million.
But we are still in the early days of a new industry; by 2040 Appinventiv estimates that AVs will represent ~25% of the transportation system. Ride-hailing could serve as the cornerstone of Waymo’s revenue, but the company also has opportunities in AV software licensing and partnerships within the gig economy. “The AV market is vast, and each 1% of US annual miles driven could translate to $108bn in revenue assuming a $3.50 revenue/mile,” notes Post. “Assuming Waymo captures 3% of US miles driven at $1.60/mile (more competitive with auto ownership), we get to a $144bn rev. Opportunity.”
All told, Post reiterated a Buy rating on GOOGL shares along with a $200 price objective. There’s potential upside of ~9% from current levels. (To watch Post’s track record, click here)
Most other analysts share Post’s view. Based on a mix of 33 Buys vs. 5 Holds, the stock claims a Strong Buy consensus rating. At $198.50, the average target is almost the same as Post’s and factors in 12-month returns of ~8%. (See GOOGL stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
