Key Takeaways
- Analysts at DA Davidson suggest Alphabet’s Waymo unit could be valued at over $200 billion, using Tesla’s market position as a direct benchmark for its autonomous vehicle potential.
- The valuation contrasts Waymo’s live, operational robotaxi services against Tesla’s largely speculative ambitions in the same sector, which currently contribute little to its revenue but significantly to its market capitalisation.
- DA Davidson forecasts Waymo could achieve $700 million in revenue by 2026, a milestone that would support a much higher, Tesla-like valuation multiple and add substantial value to Alphabet’s stock.
- Unlocking Waymo’s value, either through a spin-off or a sum-of-the-parts analysis, presents a significant opportunity for Alphabet investors, with some models suggesting it could add approximately $16 per share to the parent company’s stock.
Analysts at DA Davidson have sparked fresh debate in the autonomous vehicle sector by pegging Alphabet’s Waymo unit at a potential valuation exceeding $200 billion, drawing a direct parallel with Tesla’s market positioning. This assessment hinges on Waymo’s early-mover advantage in robotaxi operations, contrasted against Tesla’s ambitious but yet-to-be-realised plans in the same space. By framing Waymo’s worth through Tesla’s lens—where much of the electric vehicle giant’s valuation stems from speculative bets on autonomous tech—the note underscores a pivotal question: how should investors value proven progress versus promised disruption in a market poised for explosive growth?
Benchmarking Against Tesla: A Valuation Rethink
The core of DA Davidson’s thesis rests on Tesla as a comparable, a choice that amplifies Waymo’s understated potential within Alphabet’s broader empire. The disparity in how the market currently values proven operations versus future potential is stark.
| Metric | Tesla (TSLA) | Alphabet (GOOGL) / Waymo |
|---|---|---|
| Market Capitalisation | ~$991 billion | ~$2.37 trillion (Parent Co.) |
| Forward P/E Ratio | ~95 | ~22 (Parent Co.) |
| Robotaxi Revenue | Negligible (Speculative) | Operational & Growing |
| Projected Unit Valuation | Embedded in Market Cap | >$200 billion (DA Davidson) |
This comparison is rooted in a shared addressable market: the trillion-dollar mobility-as-a-service opportunity. Yet Waymo’s advantage lies in its regulatory approvals and live deployments. Tesla’s Full Self-Driving suite, while well-known, remains a supervised system, contributing to a book value per share of $24 amid ongoing research and development spending. Waymo, by contrast, leverages Alphabet’s vast resources, positioning it for a potential valuation surge that could rival Tesla’s if it were spun out or given greater prominence in sum-of-the-parts analyses.
Revenue Projections: From Modest to Monumental
Central to the $200 billion-plus valuation is DA Davidson’s forecast of Waymo reaching $700 million in revenue by 2026. This figure, while perhaps conservative given the unit’s growth trajectory, serves as a foundation for loftier estimates. The projection is built upon Waymo’s current run rate, extrapolated from hundreds of thousands of weekly paid trips, which implies a compound annual growth rate that outpaces the broader autonomous vehicle industry’s expected 40% expansion through the decade.
To put this in context, Alphabet’s trailing twelve-month EPS stands at $9.38, with Waymo’s contributions still nascent but clearly accelerating. The $700 million target for 2026 aligns with historical ramps in disruptive technology; one might recall Uber’s revenue climb from $400 million in 2014 to over $11 billion by 2018. For Waymo, eliminating driver costs could yield gross margins exceeding 60%, a figure that would far surpass Tesla’s automotive margins of around 18% in recent quarters. This efficiency underpins the bullish stance, projecting that Waymo’s revenue could scale into the billions by the decade’s end.
Naturally, the projection assumes steady regulatory tailwinds and fleet expansion. Compared to Tesla’s forward EPS estimates of $3.24, which bake in robotaxi optimism without current operational proof, Waymo’s path appears more tangible. If the unit achieves this revenue milestone, it could contribute meaningfully to Alphabet’s overall top line, which is currently projected to grow by 13% this year.
Scaling Challenges and Competitive Edges
DA Davidson’s model likely factors in Waymo’s improving unit economics, where per-ride profitability is emerging amid falling sensor and vehicle costs. Historical filings show Alphabet’s “Other Bets” segment, which houses Waymo, reported narrowing losses from $5.3 billion in 2022 to under $4 billion last year, signalling progress towards breakeven. By 2026, $700 million in revenue could flip this narrative entirely.
Competitively, Waymo’s lead in unsupervised rides—over 150,000 weekly, according to industry trackers—contrasts sharply with Tesla’s zero in paid autonomous trips. This operational moat supports the revenue forecast, with potential expansion to new cities poised to accelerate uptake. Analyst sentiment from firms like TD Cowen echoes this, projecting Waymo’s US gross bookings could reach $6.1 billion by 2034, a trajectory that validates DA Davidson’s shorter-term view and bolsters the case for a $200 billion valuation.
Implications for Investors: Unlocking Hidden Value
The DA Davidson note implicitly challenges investors to reconsider Alphabet’s conglomerate discount, where Waymo’s value is arguably buried beneath the dominance of its search business. At Alphabet’s current price-to-book ratio of 6.5, versus Tesla’s 12.8, there appears to be room for uplift if Waymo garners standalone attention. Historical precedents are plentiful: when chatter about an Amazon AWS spin-off emerged in the mid-2010s, it helped propel the parent company’s shares as the cloud unit’s potential crystallised. Similarly, a Waymo rerating could add 10-15% to Alphabet’s $196 share price.
Sentiment among financial analysts leans positive, with Oppenheimer recently hiking Alphabet’s price target to $220, citing synergies between AI and Waymo. This aligns with DA Davidson’s view, suggesting Waymo could represent 8-10% of Alphabet’s enterprise value if benchmarked to Tesla. However, risks remain. Regulatory hurdles or renewed competition from rivals like Cruise could cap the upside, much as Tesla’s own delays have tempered its stock performance.
The projection also invites speculation on strategic moves. A Waymo spin-off, as has been floated in some analyses, could unlock between $350 billion and $850 billion in value by 2030, a forecast that ties directly back to the Tesla comparison. For now, the $700 million revenue target acts as a litmus test: if achieved, the $200 billion tag gains significant credence, potentially reshaping Alphabet’s narrative from search behemoth to autonomy leader.
Market Reactions and Forward Outlook
Recent trading shows Alphabet shares edging up to $196, while Tesla’s have dipped to $307, offering a subtle nod to the comparative thesis. Over the past 200 days, Alphabet’s 12% rise has outpaced Tesla’s 5% drop, hinting at an investor preference for tangible progress over narrative potential. If Waymo’s revenue ramps as projected, it could catalyse further gains, supported by a consensus “Buy” rating for Alphabet, which is considerably stronger than the “Hold” rating for Tesla.
Ultimately, DA Davidson’s call distils to a simple observation: in a sector where valuations often hinge on future stories, Waymo’s present reality may merit a premium akin to Tesla’s promise. The $700 million forecast for 2026, while just a starting point, could prove conservative if adoption surges, positioning Waymo as Alphabet’s not-so-hidden gem in the robotaxi race.
Data as of 5 August 2025. Analysis inspired by public commentary from financial analysts.
References
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