Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Insanity

Google Self-Driving Car Project might be worth $70 Billion

Alphabet’s (NASDAQ: GOOG) self-driving vehicle startup Waymo might be worth as much as Uber or Ant Financial.

Morgan Stanley estimated Waymo’s value at $70 billion, CNBC reported. If true that would make Waymo one of the top three unicorns or pre-IPO companies in the world. Both Uber and China’s Ant Financial are usually valued at around $70 billion.

If it is true that means Waymo is already worth more than either Ford (NYSE: F) or General Motors (NYSE: GM), CNBC noted. Ford is usually valued at $44 billion and GM at around $50 billion.

One reason for the valuation is Waymo’s partnership with Lyft; which is partially owned by GM, Morgan Stanley Analyst Brian Nowak wrote. Lyft is giving Waymo access to real time diving data collected by its contractors.

Waymo Might be worth $140 billion some day

“If we assume that Waymo can grow to 1% of global miles driven by 2030 (based on a fleet of three million cars each driving 65,000 miles a year) and that Waymo can generate on average ~$1.25 in revenue per mile driven, it implies a $70 billion Waymo enterprise value,” Nowak wrote. “More miles/year and revenue/mile could lead to an enterprise value of $140 billion.”

Nowak believes that Alphabet (NASDAQ: GOOGL) will one day spin Waymo off as an independent company. He did not say where Waymo’s self-driving vehicles will come from.

This might be great news for Fiat Chrysler (NYSE: FCAU) which is partnering with Waymo to develop self-driving vans. Interestingly enough CNBC’s article included a picture of a Chrysler Pacifica minivan with Waymo markings on it.

Waymo will add a Lot of Value to Alphabet

Waymo’s potential might raise the value of Alphabet’s stock to $1,050, Nowack predicted. The company’s shares were trading at $969.28 on May 23, 2017, so that valuation might be realistic.

That means Waymo might make up 12% of Alphabet’s value. Alphabet had a market capitalization of $670.73 billion and an enterprise value of $578.39 billion on May 23, 2017.

It looks as if self-driving car technology might be a great investment. This technology might be ready for commercialization which might be a cash cow.

There is a dark side to autonomous vehicles that will create a lot of problems. If they become widely adopted self-driving cars autos would kill 25,000 jobs a month or 300,000 jobs a year, Goldman Sachs Economic Research predicted. That means a populist backlash might derail Waymo’s business plans at some time.