General Motors’ self-driving unit, Cruise, could be worth $43 billion, RBC Capital Markets estimates.
The autonomous arm received a valuation of $11.5 billion from Japan’s SoftBank in May.
GM is reportedly eyeing a spin-off or tracking stock for Cruise, Bloomberg reported last month.
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Cruise, the self-driving car company bought by General Motors in 2016, could be worth a whopping $43 billion, RBC Capital Markets estimates.
That new valuation is nearly four times the figure eyed by Japan’s SoftBank when it invested $2.25 billion in the autonomous driving unit in May. Since then, Bloomberg reported that GM was eyeing a possible spin-off or tracking stock for Cruise.
“We doubt SoftBank would have invested if they didn’t see a much larger opportunity,” Joseph Spak, RBC’s autos analyst, said in a note to clients Tuesday.
“For now, it appears GM’s plans are to run its own transportation network company (TNC). If they can get the technology right and execute on this plan, then when we run this scenario, we see them having a fleet of ~800,000 vehicles by 2030 driving ~58 billion miles that year. At $0.55/mile and 29% EBIT margins, we see ~$17 billion of EBITDA. In our DCF (11x exit multiple) this values Cruise at $43 billion.”
Cruise has been growing at a quick pace ever since GM acquired the San Francisco-based startup and its 50 employees for $581 million. GM hopes to increase Cruise’s headcount to 1,648 in California by 2021 thanks to a tax-credit package worth $8 million approved by state officials last year.
RBC says the value add from GM’s 80% stake in Cruise is currently worth about $7 a share, which the bank factors into its new $53 price target for the US’s largest automaker — 33% above where the …read more
Source:: Business Insider