Google Stock To 3x?

We believe Alphabet (NASDAQ:GOOG) could be on track to more than 3x its valuation from an already sizable $2 trillion, potentially making it the world’s most valuable company by a wide margin. Although Google stock has struggled recently, falling by about 10% following mixed Q4 results and higher projected capital spending, its real upside may come from an overlooked source – the Waymo robo taxi service. Once a moonshot project, Waymo is rapidly evolving into a viable business that could redefine transportation and unlock substantial value for Google. If it scales successfully, Google’s stock could soar past $500. Here’s why.

Fact: Waymo has grown the number of weekly paid rides from 10,000 two years ago to about 150,000 in late 2024. Google now says that Waymo is now serving over 200,000 paid trips per week across San Francisco, Los Angeles, and Phoenix.

Now, consider the scale of the broader ride-hailing market. Uber handled over 230 million rides per week in Q4 alone. That translates to roughly 12.5 billion rides per year. At an average fare of $30 per ride, we’re talking about an annual revenue pool of roughly $375 billion.

If Waymo is already delivering over 200,000 driverless rides weekly, how many more might switch from driving their own cars to fully autonomous rides? The shift could be enormous. For every person hailing a ride today, there are at least 10 others driving their own vehicles. Many of them could reconsider once they see millions of people relaxing in the back seat, streaming Netflix, while they remain stuck behind the wheel.

In fact, early data supports this. According to Earnest Analytics, Waymo retains riders at a higher rate than Uber or Lyft. This suggests that once people try fully autonomous rides, they prefer them. Safety could be another major selling point. Waymo’s safety report last year noted that its autonomous vehicles achieved a 78% reduction in injury-causing crashes compared to human drivers.

Investors will soon recognize that the $375 billion revenue figure for the current ride-hailing market has substantial growth potential – it could easily expand by over 3x. A $1 trillion-plus market for autonomous rides probably isn’t out of the question.

But Aren’t So Many Auto And Tech Companies Already In The Autonomous Driving Race?

Yes, but not all of them are making the same progress.

Waymo has a head start in the market. One of its primary competitors, General Motors-backed Cruise, lost its driverless permits in California after a serious accident, making Waymo the only publicly available robotaxi service in San Francisco. Uber exited its self-driving taxi program over six years ago and has partnered with Waymo to bring its services to the Uber app in some cities. The two companies just started offering robotaxi rides in Austin, Texas, just ahead of the SXSW festival.  Meanwhile, Tesla, which is often seen as a leader in autonomous driving, hasn’t even entered the ride-hailing market yet. Tesla unveiled its Robotaxi concept last year, but it doesn’t manufacture the vehicle just yet. Plus, Elon Musk’s increasing involvement in politics could turn off many potential customers.

Waymo has some advantages in terms of tech, as well. It uses a fleet equipped with a powerful combination of high-resolution cameras, LiDAR, and radar systems, creating a comprehensive view of its surroundings. And don’t forget that Google’s got a secret weapon. It crowdsources annotated data such as CAPTCHA codes from its massive user base, using that to train its machine-learning models. That’s a big advantage in terms of understanding complex driving environments.

The best part?

These are self-driving cars – no human drivers, no unions, no employee or contractor issues, and no human cost. While there will be other expenses, such as software development and battery costs, the absence of driver wages could lead to exceptionally high margins. Margins of 50% aren’t unrealistic when you consider that driver earnings account for a substantial portion of gross fares in traditional ride-hailing models.

If Waymo can capture about one-third of the $1 trillion autonomous rides market, it could generate annual revenues of around $300 billion. With a 50% margin, that’s a neat $150 billion in profits. What’s that worth? At a 30x earnings multiple, that would imply an additional valuation of about $4.5 trillion for Alphabet. Considering that Alphabet is worth roughly $2.1 trillion presently, this could take the company’s market cap to over $6.5 trillion, or over $500 per share. To be sure, building this sort of scale can take a decent amount of time – quite different from signing up for, say, a Google or Netflix account. However, investors will need to look well into the future. Think 2030 (not 2025), maybe even more. The point is not to get stuck.  If you’re concerned, look even further out, say 2035! The bottom line is that Alphabet is scaling Waymo quickly, it has the technology and competitive edge, and it is addressing a potentially massive market, making this high valuation within reach.

The increase in GOOG stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 65% in 2021, -39% in 2022, 59% in 2023, and 35% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period.

Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could GOOG face a similar situation as it did in 2022 and underperform the S&P over the next 12 months – or will it see a strong jump?

Investors may be underestimating not just Waymo’s potential but also the overall Internet business, which has been doing well. Over Q4 2024, Google saw its cloud business segment sales grow by a solid 30% to $11.96 billion. Google search revenue was up 12.5% to $54 billion, and YouTube ad revenue was up 13.8% to $10.5 billion. Overall, Google’s revenues for the quarter came in at $96.5 billion, rising 12% y-o-y. Not only did Alphabet see its revenue rise, its operating margin expanded 500 bps y-o-y to 32% in Q4. Higher revenue and margin expansion led to a 31% rise in the bottom line to $2.15 per share. Google’s valuation is reasonable, with the stock trading at just 19x consensus 2025 earnings and 17x consensus 2026 earnings.

[1] Returns as of 3/5/2025
[2] Cumulative total returns since the end of 2016

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