Waymo’s Autonomous Driving Can Bring Alphabet Yet Another Revenue Stream

  • Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Waymo unit announced on March 30 that it will expand its San Francisco test of autonomous driving 
  • It’s a sign the company is getting closer to delivering fully autonomous driving in urban settings
  • It’s just another reason investors should want to buy GOOG stock
Waymo self driving car performing tests on a street near Google's headquarters, Silicon Valley

Source: Tero Vesalainen / Shutterstock.com

Alphabet’s Waymo unit announced on March 30 that it was taking the next step in testing fully autonomous driving in San Francisco. The move is another reason investors should own GOOG stock for the long haul.

GOOG Alphabet $2,815.46
GOOGL Alphabet $2,806.07

The Latest From Waymo and GOOG Stock

According to Waymo’s blog post, it will make its fully autonomous all-electric Jaguar I-Pace vehicle available to San Francisco-area employees who want a driverless ride to work. That’s right; there will be no human behind the wheel. 

“We’ve learned so much from our San Francisco Trusted Testers over the last six months, not to mention the innumerable lessons from our riders in the years since launching our fully autonomous service in the East Valley of Phoenix,” stated co-CEO Tekedra Mawakana.

Waymo started the testing process in Austin in 2015, then expanded its operations to Phoenix in 2017. While it’s been a long journey — and it’s not over yet — Waymo is getting closer to delivering fully autonomous driving in urban settings.

That’s excellent news if you’re at all interested in GOOG stock.

GOOG Stock Doesn’t Need More Help

Alphabet’s share price is down 2.5% year-to-date through March 30, less than half the S&P 500’s decline of 5.4%. Over the past five years, GOOG is up 240% compared to 93% for the index. 

Its stock doesn’t need help to move higher. However, this latest piece of news will likely influence its share price in a good way.

Building a safe and reliable Waymo Driver will enable it to transfer the technology to different geographies and products lines. That includes Waymo One for ride-hailing and Waymo Via for trucking and last-mile delivery. 

If you follow the trucking industry, you know driver shortages in the U.S. and Canada are a real problem. As Waymo states on its Waymo Via page, 70% of freight in the U.S. is sent by truck. 

Fewer drivers means less freight gets shipped, resulting in lower sales. It’s a circular problem that hurts everyone in the supply chain. However, the shortage has less to do with sheer numbers and more to do with low wages and unreasonable work demands. Truckers are leaving the industry for better-paying, less stressful work.

If enough trucking companies were to implement Waymo Via, the shortage issue would likely be mitigated, reducing labor costs while ensuring deliveries get to customers on time.

Waymo’s Future Customers

The potential for autonomous driving in the trucking industry is massive. In January, Waymo Via and JB Hunt Transport Services (NASDAQ:JBHT) expanded their partnership from a pilot project to a long-term strategic alliance.  

The two companies tested driverless trucking on the I-45 Interstate between Houston and Fort Worth. Throughout its test, they shipped almost 900,000 pounds of freight with excellent results: They saw no crashes, no speeding tickets and a 100% on-time pickup and delivery record. 

Craig Harper, chief sustainability officer and executive vice president at J.B. Hunt, said:

“Our pilot last year with Waymo Via really helped us get a hands-on understanding of how autonomous driving technology could be implemented within our operations … This strategic alliance will continue that momentum and further explore the intricate details that would make this a value-driven solution for customers.”

One of the areas in which Waymo looks to grow is supplying the truck makers with Waymo Driver. It will start with Daimler (OTCMKTS:DMLRY) and expand from there. The revenue potential is significant; estimates put the autonomous trucking market at $2.01 billion by 2027. I suspect it will be much more once these trucks actually start moving freight.   

Waymo Is Currently a Rounding Error

The beauty of investing in GOOG stock is Waymo is currently an infinitesimally small part of its overall business. So whether or not it’s ultimately successful, the company has plenty of revenue streams to satisfy its shareholders’ desire for profit.

In the meantime, if you own GOOG stock, you can sit back knowing that the company generated $67 billion in free cash flow in 2021. It has more than $136 billion in cash and marketable securities on its balance sheet. 

Waymo is a rounding error for the company. However, should it continue to successfully test Waymo Driver, the division could become a much more important part of Alphabet’s business. 

Either way, I don’t think you have to worry about Waymo crimping Alphabet’s style. It’s doing just fine either way.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


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