The Secret Behind The Hype On This Not So Secret Stock
Bill Poulos | Nov 02, 2018 07:16PM ET
What Mainstream Media hasn’t been telling you about Waymo’s Early Rider Program
We’ve all seen the movies. According to Hollywood, the future of driving is automated. Cars that drive themselves. And the company Waymo (a subsidiary of Alphabet (NASDAQ:GOOGL)) is more than a little ahead of its competitors in that department. Waymo’s ‘Early Rider’ program has done its fair share to offset at least a fraction of the operating costs they have accrued. Those operating costs total roughly $716 Million in one quarter alone. The ‘Early Rider’ program boils down to a taxi service without a taxi driver. Would you be willing to take a ride in a self-driving car?
The ‘Early Rider’ program’s initial earnings of $146 million in Q3 might seem like small change, however an Alphabet representative named Ruth Porat feels this is just the beginning.
“In the third quarter we built on our Early Rider Program, both expanding the group of participants and beginning to test pricing models,” Porat said. “So we do now have people paying for rides, and we're also testing pricing models.”
She went on to add that the company was looking into new prospects in deliveries and logistics. In addition, Porat said that they are still in the early phases of the program but that they are taking purposeful strides towards branching out in the market.
Sharing Porat’s optimism in Waymo was Google’s CEO, Sundar Pichai. “We take a very long-term view, and we want to invest to get the user experience right. And we are pretty confident that when we do that, the value will follow.”
Waymo is Working Hard and Logging some Serious Mileage
This past summer, Waymo’s CEO John Krafcik presented at the National Governor’s Association taking place in Santa Fe. There, he boasted a whopping 8 Million miles driven on public roads, more than double their miles from just eight months prior to the conference.
Those miles, when compared to the distance driven by Waymo in 2015, has increased exponentially. Back then, there were several thousand Waymo vehicles on the road. Now, that number is 25,000 with an additional 80,000 anticipated in the near future. Each and every one of those thousands of vehicles sends a large quantity of information to Alphabet HQ where it is processed by Google’s Deep Mind AI. That AI sorts through the data and uses it to learn, creating safer, more efficient, smarter autonomous algorithms for its vehicles.
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Now, one wouldn’t normally look at a number like 8 Million and call it small potatoes but that’s because you haven’t heard how many miles Waymo has driven in simulations. How many? 5 Billion miles. To put it in perspective, you would have to fly to the moon and back 10,464 times to log that kind of distance. I would not recommend doing it with a lease. The extra mileage fees would be brutal.
Automated Vehicles are Potentially a Trillion-Dollar Market and Alphabet is at the Front of the Pack
The Self-Driving Cars of today are not exactly stylish but, looking to the horizon; they could stimulate the market beyond our wildest dreams, saving countries around the world billions.
It’s hard to put a price tag on innovation but market analysts have done it. They project that this avenue of business could be as much as a $7 Trillion market within the next forty years. It will also save the economy billions in health costs, property damage, and insurance costs. It could alter the way we build our roads, design our cities, and live our lives.
Waymo is chomping at the bit to dominate this market in the making and it looks like they might just pull it off:
Resources: Alphabet has built up a reservoir of cash to fund their research and development in addition to the powerhouse that is Google. Google is the primary pillar upon which Alphabet stands, boasting a Q3 Earnings Report that was 21% above projections in 2018.
Connections: On Tuesday, October 30th, California’s Department of Motor Vehicles granted the first permit to allow driverless vehicles on a trial basis in Santa Clara county. Arizona, Florida, Colorado and several other states have issued their own permits for the testing of autonomous vehicles.
Reputation: While the media coverage surrounding Autonomous Cars hasn’t always been good, Waymo has been able to avoid any bad publicity. They have yet to kill any pedestrians or homeless citizens (stares blatantly at Uber). At least, they haven’t killed anyone yet.
We are lucky enough to be present for the dawn of a new industry. An industry we anticipate Alphabet dominating by as much as 60% based on estimates from analysts at Financial Times. While other investors bust their butts working to earn short-term revenues, you might want to consider ‘buying the dip’.
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