Proactive Investors - Wall Street's interest in Waymo, a subsidiary of Google’s parent company Alphabet (NASDAQ:GOOGL) Inc (NASDAQ:GOOG) focused on self-driving technology, could be reignited by electric vehicle maker Tesla Inc (NASDAQ:TSLA)'s upcoming Robotaxi day, analysts at the Bank of America (NYSE:BAC) believe.
The analysts wrote that they “dramatically overestimated” the pace of Waymo’s rollout and, since 2018, investor interest in Waymo and its contribution to Alphabet’s valuation has faded.
However, they highlighted that Waymo has Level 4 autonomous vehicle (AV) leadership in terms of miles driven with more than 7 million AV miles since it launched, and has made significant progress toward commercializing its AV fleet.
Notably, as Apple (NASDAQ:AAPL) and Cruise have faced technological hurdles with their respective AV offerings, Waymo operates in Phoenix, San Fransisco, and Los Angeles, with plans to launch in Austin and expand its coverage in California.
Waymo’s presence in San Fransisco is also “hard to miss,” they wrote, with more than 250 cars in the area.
“With the recent breakthroughs in AI and compute, the AV industry has a better opportunity to break through previous bottlenecks and accelerate the rollout,” they wrote.
“We reviewed Waymo's progress and opportunity, which could see renewed investor focus around Tesla's Robotaxi day scheduled in August.”
The analysts see ride-hailing expected to be the foundation of Waymo's revenue alongside opportunities for AV software licensing and gig economy partnerships.
“The AV market is vast, and each 1% of US annual miles driven could translate to $108 billion in revenue assuming a $3.50 revenue/mile,” they forecast.
“Assuming Waymo captures 3% of US miles driven at $1.60/mile (more competitive with auto ownership), we get to a $144 billion in revenue.”
However, they noted that Waymo still needs to bring down its costs.
“In a peak time comparison of ride costs in San Francisco, we found Waymo priced 6% more than Uber/Lyft (though no tips), and the industry remains well above per/mile car ownership,” they wrote.
The analysts have a ‘Buy’ rating and a $200 price target on Alphabet, which closed at $177.71 on Thursday.