Analyst: Waymo Is Worth 10 Times Tesla's Ride-Sharing Business

Tesla Inc TSLA has been developing its autonomous driving technology for years, but one Wall Street analyst estimates the value of Tesla’s Mobility unit at just 10 percent that of Alphabet Inc GOOG GOOGL autonomous vehicle subsidiary Waymo.

The Analyst

Morgan Stanley analyst Adam Jonas reiterated an Equal-Weight rating and $291 price target for Tesla and an Overweight rating and $1,515 target for Alphabet.

The Thesis

Tesla’s driverless competition has come on strong in the past three years, clouding the outlook for its Mobility unit, Jonas said in a Tuesday note. 

Morgan Stanley recently raised its valuation for Waymo to $175 billion, roughly 10 times the $17.7-billion value Jonas assigns to Tesla Mobility. Jonas said even General Motors Company GM is competitive with its Cruise driverless unit, which is now valued at $11.5 billion following a $2.25-billion investment by SoftBank.

Looking ahead, Jonas estimates Tesla’s driverless fleet will beat out Waymo’s in size and revenue in the long-term. He forecast a Waymo fleet of 1.2 million vehicles by 2030 compared to a 1.7-million-vehicle fleet for Tesla and 500,000-vehicle fleet for GM. Tesla’s fleet will generate $116 billion in revenue by 2030 compared to $98 billion for Waymo and just $35 billion for GM, according to Morgan Stanley's estimates.

Tesla may eventually be forced to make some difficult decisions, Jonas said. 

“In our opinion, Tesla may one day need to make a strategic decision over whether to pursue a shared autonomy strategy on a ‘go-it-alone' basis or whether to find ways to ‘attach’ their vehicle data and fleet management ecosystem to one or more external platforms that may be in a far better position to pursue data monetization, improved customer engagement/experience and lower cost to the customer." 

Price Action

Tesla shares were down another 4.17 percent at the time of publication Tuesday following the Morgan Stanley note and are now down 17.3 percent in the past year. Alphabet Class A shares were down 1.45 percent at $1,214.02.

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Photo courtesy of Tesla.