Google's Waymo could eventually be a $70 billion company

Waymo, Google’s self-driving car project, recently announced a partnership with the ridesharing company Lyft, which could be its first step towards becoming a major contributor to Google’s overall value.

If Waymo vehicles can account for roughly 1% of miles driven globally by 2030, Morgan Stanley equity analysts Brian Nowak and Adam Jonas believe it could be worth $US70 billion, potentially more. That would add roughly 12% to Google’s current enterprise value.

“We are encouraged by Waymo’s new partnership with Lyft as it gives Waymo access to more miles driven — which,” write Nowak and Jonas, “is important to building/optimising the autonomous business and data set.”

Waymo is also Google’s most likely spin-out from its “other bets,” a group of investments the web company has made in different industries such as home automation and mobile hardware, according to Nowak and Jonas. Waymo — formerly called Google X — has already rebranded and carries significant room for growth, making it an enticing spin out candidate.

Additionally, Google may not want to bear the burden of legal action against the company stemming from accidents involving Waymo’s vehicles.

“Even assuming Waymo’s cars are involved in 90% fewer crashes than the average human driven car would still involve 5 per year (roughly 1 every 10 weeks),” write Nowak and Jones. “One could argue that even in the event Waymo’s cars are an order of magnitude safer than today’s human driven cars GOOGL may not want to test the US court system for the precedent.”

But if Waymo can find a way to improve on the Morgan Stanley’s modelled revenue of $US1.25 per mile and 1% of global miles driven, Nowak and Jonas see a scenario in which the company’s value could increase to roughly $US140 billion.

Get the latest Google stock price here.

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