"This Valuation Says Google’s Waymo Unit Is Worth More Than Tesla" (GOOG)

From Barron's, August 22:

The global auto transportation market is worth $5 trillion and clearly presents a massive opportunity for Waymo, according to analyst Anthony DiClemente and his team at Evercore. But it's difficult to predict how dynamics and widespread adoption will play out in the long term, from the role of car manufacturers to the realized safety gains that autonomous vehicles actually provide. “Waymo's opportunity is difficult to understate but is subject to a large number of ‘unknown unknowns,’” DiClemente wrote in a report Wednesday morning.

To derive their valuation the Evercore team focused on the near-term commercial execution of a Waymo autonomous ride hailing service to rival Uber and Lyft. Under the $100 billion scenario, they estimate that the service would generate $1 billion in annual revenue by 2022, increasing to $10 billion about 2025. The analysts believe that Waymo could undercut Uber’s pricing by 25%, growing the $20 billion U.S. ride hailing service market. They note that in the past five years, Uber and Lyft have quadrupled the traditional taxi market through reducing prices by about 20% and that they "see no reason why a similar dynamic would not repeat with autonomous ride services.”

Using those estimates and weighing different probabilities for market growth and the market share that Waymo can eventually capture, DiClemente calculates a discounted present value of $65 billion for the unit....

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