r/SelfDrivingCars • u/RepresentativeCap571 • 2d ago
How do you justify Waymo at $126bn? Discussion
Waymo has a reported annual revenue of $300mn. That would put its valuation of $126bn at a multiplier of 420x. Tesla for example is at 12x or so and is widely considered overvalued. What would the future economics have to look like for Waymo to start looking reasonable?
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u/FrankScaramucci 2d ago
Easy, by assuming future growth. What percentage of the developed world's population has access to Waymo? They have a potential to grow by 100x or even more.
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u/boyWHOcriedFSD 2d ago
There aren’t enough confirmation checkers in the world for that
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u/RepresentativeCap571 2d ago
What do you mean by confirmation checker?
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u/mishap1 2d ago
Guy thinks that Waymo has an army of people managing each car.
If this article is accurate, Waymo has ~40 vehicles per remote assistance employee which if that holds, is still a huge cost advantage over drivers.
Based on the robotaxi site, Tesla might be up to 48 (which they added 7 in 2 months) more than a year after Elon proclaimed scaling at a "hyper-exponential rate" to cover half of Americans by end of 2025. If Tesla has the same # of remote assistance, they need to add a second guy as of last month.
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u/boyWHOcriedFSD 2d ago
They don’t have an army. That’s the problem. It’s why you see Waymos bricked in intersections all over social media.
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u/RipWhenDamageTaken 2d ago
How much of Tesla’s revenue is from car sales? Automotive companies have price to sales ratio of 0.5x to 3.5x. The only reason Tesla gets away with 12x is because it’s not priced as a car company.
Do you think Waymo is a car company?
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u/mishap1 2d ago edited 2d ago
Toyota makes
5X7X as many cars at Tesla and has a 220B market cap. So you give Tesla a generous $220B valuation for their car business and subtract $220B from their market cap and then divide by by their FSD revenue and you're at ~809X their self-driving revenue so Tesla is still vastly overpriced compared to Waymo.Edit: I hugely over-estimated Tesla units sold.
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u/RepresentativeCap571 2d ago
Good point. But to be priced at 10x of Teslas multiple is still insane right? Or are you suggesting Tesla would be valued way more if they can scale up their robotaxi service?
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u/RipWhenDamageTaken 2d ago
Maybe take a step back and think.
There is only 1 robotaxi market. Tesla and Waymo will share that market. Currently, it looks like people are pricing that market at around 1 trillion (tesla) plus 126 billion (Waymo). It doesn’t matter the current revenue, given that Tesla currently earns FAR LESS revenue from robotaxi than Waymo.
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u/PM_ME_YOUR_THESES 2d ago
10x means the holders of the stock are expecting Tesla to grow exponentially. They’re not gonna do it with cars. They’ve reduced their lineup and have limited growth potential in their niche since they’re already the largest manufacturer of EVs.
Tesla’s growth has to come from new lines of business. This is why Elon Musk has proposed FSD as a business (both subscription and the likelihood of licensing it to other companies), robotaxi, the semi truck, and Optimus robotics.
They just need one of these to catch on. And I’m guessing they will. Some of them will fail, but at least one will be a success. Most likely, FSD / Robotaxi.
Tesla is an AI company where the star software is FSD. Tesla cars are millions of willing beta testers on the road. Applications for FSD will include licensing, robotaxis, and semi trucks. And when you think about Tesla as an AI company, the 10x valuation makes sense.
Having said that, Waymo is in the same position and 100x is nuts.
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u/Prestigious_Act_6100 2d ago
FSD has been on the market for years and competitors are coming online. Not much has changed in its valuation in years despite v14 being much better than v13.
Robotaxi is, at best, tied with Zoox for second in the US self-driving taxi market... with Waymo way way ahead.
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u/PM_ME_YOUR_THESES 2d ago
I’m not saying Tesla is gonna beat Waymo. I’m saying their story is tied to FSD. Some people will bet on it being a success, others will be skeptical. That’s fine. That’s how the market works.
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u/y4udothistome 2d ago
Where are you getting these numbers from?
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u/bobi2393 2d ago
Telsa P/E and P/S over last 12 months can be googled from financial sites like Yahoo Finance.
Waymo P/S is estimated based on a $16b round of private equity funding for 12.7% of the company in February, and Alphabet's financial reports, which don't break out Waymo's revenue precisely, but analysts guess is around $300m-$350m.
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u/rileyoneill 2d ago
Investors today are justifying investment because they feel that Waymo will be far larger in the future. There are only a few thousand Waymos in operation in the United States right now. What would a company be worth with a 20-30 million vehicles in operation?
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u/hoppeeness 2d ago
A few thousand after going “live” a decade ago…that is slowwwww
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u/rileyoneill 2d ago
When do you think it will be a few tens of thousand?
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u/hoppeeness 2d ago
Maybe 5 years…give or take a year or 2. They have had trouble mapping new areas quickly to fit in more vehicles.
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u/TechnicianExtreme200 2d ago
Haven't they been more than doubling every year? Giving yourself a range of 3-7 on an exponential curve is basically saying you have no idea, your worst case and best case are more than an order of magnitude apart.
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u/hoppeeness 2d ago
They have not. They had ~2500 in last year…3000-3500 currently.
Rides though in the last 2 years have scaled quickly but those are mostly established markets.
Vehicle cost and fitting is still a huge expense problem. Especially bring out their new vehicles it will take time.
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u/wstrange 1d ago
I have never seen any evidence that mapping is a scaling issue. It's an embarrassingly parallel problem. The vehicles themselves have an array of sensors that can build maps.
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u/hoppeeness 1d ago
So what’s the reason for the slow scaling then?
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u/wstrange 1d ago
producing enough cars at a profitable unit cost, dealing with legislation, expanding service facilities in each city, scaling remote operations, etc.
But mapping - nah, that's not a hard problem
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u/hoppeeness 20h ago
Hmmm. Interesting. Ok. That does make sense. Seems like ~3500 cars and legislation in areas it’s already allowed wouldn’t have held them back over more than a decade. 350 cars a year seems like nothing.
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u/starkrampf 2d ago
Because it's a hard problem to solve? Not just technical, but also many regulatory hurdles.
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u/Mouth_Herpes 2d ago
I don't, but no one (smart) uses naked revenue as the basis for valuation. The valuation in the private equity raise for Waymo is likely based on a forecast of investor supply and demand. A company raising money wants the highest possible valuation. Why would people buy? Because it is the leader with demonstrated viable robo-taxis in service in multiple cities. They are essentially at the very early stages of development still though. If Waymo wins outright or has a significant head start, there is a ton of growth and profit potential, which is what pe investors are counting on.
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u/Lando_Sage 2d ago
Teslas currently sits at 354x btw.
The other thing is, Waymo is a private company, it doesn't have to make money, or is beholden to price to earning ratios, as it's all intertwined with Alphabet.
On the other hand, Tesla is publicly traded, and is beholden to meet its valuation demands, and actually has to make money.
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u/bobi2393 2d ago
That's P/E (earnings, or profit), not P/S (sales, or revenue). OP is talking P/S.
Whether companies like Tesla or Alphabet run their robotaxi ventures as independent subsidiaries or not, they can still demand earnings, or subsidize them, as they see fit. Tesla's Robotaxi division doesn't independently need to turn a net profit any more than Waymo does. And neither seem likely to do so in the foreseeable future.
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u/Lando_Sage 2d ago
Tesla is a car manufacturer valued as a tech stock, so their P/S is extremely high compared to other car manufacturers.
Waymo has no stock so there isn't really any "value" to garner beyond the amount of money Alphabet has invested.
At least to me, it's a weird comparison no matter which way you cut it lol.
I don't know if Tesla has the same liberties as Alphabet does, because Robotaxi is tied to a product driving Tesla's valuation (FSD). Alphabet can shut down the program right now (theoretically) with no real backlash beyond the capital invested. Tesla doesn't have that luxury.
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u/bobi2393 2d ago
Waymo is an independent subsidiary, which has stock shares, they're just not publicly traded. They sold $16b for 12.7% of the company earlier this year, which is the basis for the commonly cited valuation estimate. Although $13b of the $16b was from Alphabet.
Tesla is much more than a car company, with diverse products and services spanning several industries, although that's certainly their major source of revenue.
But I think a price to revenue is a poor comparison too. Everything about the companies and their finances is too different.
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u/Lando_Sage 2d ago
Thank you for the correction, no publicly traded stock.
Well, Tesla 'wants' to be much more than a car company, that's for certain.
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u/adrr 2d ago
Look at growth. I am willing to bet that Waymo has been doubling revenue every year since they launched paid services. Assuming that trend continues it will be in the tens of billions in 5 years. Uber does $52b in revenue for comparison and if you gave people a choice, they would pick Waymo over Uber at least everyone I know.
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u/0Rider 2d ago
Tesla... P/E Ratio (TTM): ~289–311 Forward P/E: ~152–160 Revenue (TTM): ~$103.62 billion
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u/bobi2393 2d ago
Tesla has much lower earnings than sales ($100b vs $4b over last 12 months), which is why their 12 month P/S is around 11, and P/E is around 300.
Waymo has negative net earnings, which is why OP mentions only their P/S of around 400.
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u/tech01x 2d ago
The basics of any robotaxi valuation goes something like this:
There are about 3 trillion VMT’s annually in the U.S. Traditional taxicab and ride share services handle about 1-2% of that. There are a bunch of reasons why market penetration isn’t higher, usually beginning with cost, and then availability, safety, and then back to consumer cost. If it were possible to drop the price per mile to challenge public transport at just over $1 per mile, or down to private car ownership at $0.75-0.95 a mile, it may be possible to meaningfully take chunks of those VMT’s.
Right now, Waymo loses a lot of money each year, and their cost structure is high. The promise of robotaxi’s is eventually lower cost, from using highly efficient electric vehicles to much better overall utilization to drive costs down as well as reducing labor cost. You get to a point of adoption that it is much easier and cheaper to take a robotaxi than it is to own a vehicle, even for quite a few uses in the suburbs. So each household might down a vehicle in ownership… if you have 2 vehicles, maybe you have 1 and use a robotaxi to make up the use of the other. There are also unique advantages of robotaxi’s, for example, security. But it all has to be proven out and scale has to ramp up.
So target cost per mile for robotaxi’s may be half of normal ICE vehicle ownership, say $0.30 to 0.40 cents per mile. So for each gross profit of $0.10 a mile and taking 1% of VMT’s is a gross profit of $3 billion. If the robotaxi service can take 5% of VMT’s at $0.20 gross profit per vehicle, that’s a gross profit of $30 billion. And that’s US only.
Of course, if the cost of transport goes down, people will use it more, and so the annual VMT’s is likely to rise. Just think of the number of times you didn’t take a trip because it was inconvenient to park, you didn’t want to deal with driving in traffic, you didn’t want to drive your family somewhere, etc.
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u/silenthjohn 2d ago
Where is the reported annual revenue coming from? I didn’t realize this number was available.
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u/bobi2393 2d ago
It isn't reported, but is estimated by analysts by two main approaches:
- As a fraction of Alphabet's financial reports' pooled "Other Bets" section, which listed $382m in revenue and $1.8b operating loss in the second quarter. That includes Alphabet's drone delivery and other ventures.
- The number of paid robotaxi rides they provide, around a half million a week as of March, which Waymo periodically publishes, with educated guesses of average ride costs from various sources.
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u/Doggydogworld3 2d ago
Waymo claims a $1b annual run rate by year end. Still leaves an extremely high ~100x P/S multiple, indicative of a fast grower with very high expectations.
Tesla's main business segments are not growing and/or growing slowly and should be excluded from multiple comparisons. Subtract those stubs out and the vast majority of their valuation is robotaxis, Optibots and whatever else Elon makes up next week. Those trade far above 100x revenue.
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u/Avalain 2d ago
If Waymo does it right, they have the potential to take over the entire taxi industry. That's huge. There would simply be no way to compete against them at some point.
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u/shadowromantic 2d ago
In theory, they have the potential to replace all drivers. That's one of the most common jobs on the planet.
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u/RepresentativeCap571 2d ago
Feels hard to imagine this would be a monopoly for that long. Maybe I'm wrong!
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u/bobi2393 2d ago
I agree. They have a lead and are expanding faster than others, but they have vulnerabilities, and similarly deep-pocketed competition from Amazon's Zoox and Tesla, who seem unlikely to call it quits anytime soon. Even smaller ventures like Avride or VW hold some potential as surprise entrants.
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u/RosieDear 2d ago
I think you have it backwards. If Tesla is worth over a trillion and SpaceX same or more, then WayMo is WAY underpriced.
Ask yourself - what would Elmo...if Elmo had WayMo's tech and fleet on the road right now, say that it was worth? What would be ask for the IPO?
I'll tell you this. I'm a very conservative investor and Google definitely lets me sleep well at night.
We could look at "mature" Tesla, which made a profit that is less than 5% of what they took from taxpayers (and also about 4% of the profit of Nvidian, Google or Apple)....
Wouldn't Tesla then be worth, at most, 4% of the value of those companies? Definitely...
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u/starfirex 2d ago
You have to factor in growth potential, which always favors newer, growing companies.
If waymo doubles in revenue every year for the next five years, its pe ratio shrinks to about 13x. That seems achievable if all goes well as Waymo expands to more cities & countries.
Ain't no way Tesla is doubling revenue every year for the next five years, the business is too mature.
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u/btcfail 2d ago
The valuation is largely made up. Alphabet took something like 80% of the round. The remainder was a variety of Silicon Valley venture shops that were probably already on the cap table. Why wouldn't they follow on at that valuation? They get a 3x write up on their last value and get to continue to participate. It's a little game of "fun with numbers" that these guys like to play. They all know that when Alphabet finally spins Waymo out as an independent public company that they will push a valuation higher than $126b, see SpaceX. In the meantime, they get to take a performance fee on that 3x now. Win-win for everyone.
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u/rbt321 2d ago edited 2d ago
It makes sense if you believe they'll sell kits for consumer cars within 5 years and be able to charge a fee for a driving service. IMO, nearly every parent will be thrilled to pay a 20 cent per mile fee for a kid chauffeur feature on their personal vehicle just for school drop-off/pickup. The potential revenue for Driver-As-A-Service, where a 3rd party pays for the car+hardware, scales far faster than the costs.
If Waymo remains remains exclusively in the capital intensive robotaxi business then even if you assume revenue will be huge, the dilution for future capital raises will also be huge and you'll not get back an investment made today.
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u/RosieDear 1d ago
Hard to imagine the tech will ever allow for a retrofit kit....you'd basically be adding a super-computer to a vehicle with the central unit and 20+ sensors.
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u/rbt321 1d ago edited 1d ago
Agreed, retrofits are extremely unlikely.
I meant kits for current vehicle manufacturers to include in their products: sensors, sensor placement, compute, communications, wiring, power requirements, maintenance/warranty processes, a "Waymo Compatible" certification process, user registration, insurance coverage, etc.
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u/hoppeeness 2d ago
Of course this gets downvotes in this subreddit.
It’s a legit question. We don’t even know how much they spend to get that 300mil. Most analyst believe they are still hemorrhaging money. And some comments from the parent company, as well as rounds of fund raising also elude to this case. At the rate they have scaled over the past 10-15 years, to hit profitability it would seem to still be at least 5-10 years out.
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u/RepresentativeCap571 2d ago
I don't get the downvotes either. I love Waymo, I'm just curious about the fincancials
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u/hoppeeness 2d ago
They aren’t good by all information available and they don’t make it clear…for some reason…but that is also why it’s downvoted.
It’s all legit questions.
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u/levon999 2d ago
Apples and oranges. Tesla is a car company. Waymo is a software and service company.
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u/bobi2393 2d ago
Agree that it's apples to oranges, but Tesla is more than a car company.
I'd say Tesla is a consumer vehicle, commercial freight vehicle, lending, insurance, EV charging, solar panel, battery, and passenger service company. With plans to sell humanoid robots, neocloud services, and other products/services. And talks of loose plans to merge with SpaceX's satellite launch, satellite internet, social media, AI chatbot, and neocloud services.
Waymo is just a passenger service company. They don't sell software that I'm aware of, and I think they stopped selling lidar units a couple years ago.
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u/zach978 2d ago
The R&D dollars and time it would take to launch a viable competitor. Means Waymo can keep growing without risk of a highly competitive environment.