Waymo Brings Fully Driverless Rides to San Francisco

Alphabet’s (GOOGL) autonomous driving unit Waymo launched its fully driverless ride-hailing service in San Francisco. The move marks an attempt to catch up to rival Cruise, which opened its fully driverless ride service to the public in the city a month ago after initially rolling it out to its staff.

Similarly, Waymo is also offering fully driverless rides to its employees in San Francisco before opening it up to the public. Waymo’s autonomous taxis have been operating in San Francisco for months in a test program, albeit with a human driver behind the wheel. It is now removing human drivers, so the cars will be moving alone to pick up and drop off riders.

While it is the first time Waymo is offering fully driverless rides in San Francisco, it has been offering the service in parts of Arizona’s capital Phoenix, for a few years. The launch in San Francisco comes as Waymo also prepares to expand the service to more areas in Phoenix. 

$39 Billion at Stake in Robotaxi Market

Cruise and Waymo have their sights on the potentially lucrative robotaxi market, whose global size is forecast to exceed $1 billion in 2023 and reach $38.6 billion by 2030. Removing human drivers can enable companies to cut their operating costs, which could lead to a more profitable business. 

Cruise is initially offering the public free rides as it awaits a regulatory green light to charge fares. Waymo is already charging customers for taking its fully driverless rides in Phoenix.

Cruise and Waymo are units of Alphabet and General Motors (GM), respectively; however, both have also received funding from outside investors. Waymo is backed by Silver Lake, Andreessen Horowitz, Canada Pension Plan Investment Board, and Mubadala Investment Company. Meanwhile, Cruise is backed by SoftBank, Honda Motor Company (HMC), Microsoft (MSFT), and Walmart (WMT).

What Does Waymo’s Move Mean for Alphabet’s Stock?

Waymo belongs to Alphabet’s Other Bets division, which houses mostly experimental ventures, such as Verily in health technology and Loon in internet service. Other Bets revenue declined to $181 million in Q4 2022, from $196 million in the same quarter the previous year. But the division’s operating loss increased to $1.45 billion from $1.14 billion a year ago. 

Alphabet may be able to reduce its Other Bets losses once Waymo begins to charge customers for its fully driverless rides in San Francisco and expands the service in Phoenix. 

Wall Street’s Take

On March 29, Morgan Stanley analyst Brian Nowak reiterated a Buy rating on Alphabet stock without assigning it a price target. The analyst cautions that the Russia-Ukraine war could reduce online ad spending. 

Consensus among analysts is a Strong Buy based on 30 Buys. The average Alphabet price target stands at $3,490 and implies upside potential of 22% to current levels. Shares have gained 38% over the past year.

Stock Investors

TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on Alphabet, with 2.6% of portfolios tracked by TipRanks increasing their exposure to GOOGL stock over the past 30 days.

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