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Alphabet's Waymo and Lyft Collaborate on Driverless Car

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Alphabet Inc.’s (GOOGL - Free Report) recently formed self-driving car unit, Waymo, teamed up with Lyft Inc, to accelerate its competitive push against Uber.

Alphabet in particular, could throw a wrench into Uber’s lofty self-driving car technology ambitions, given its resources and technology strengths. Google has reportedly made the greatest progress in developing self-driving technology.

We believe that continued focus on innovation is likely to drive Alphabet’s stock price, going ahead. Year to date, the company’s shares have rallied 20.6% compared with the Zacks Internet-Services industry’sgain of 17.2%.

Waymo is currently involved in a fierce court battle with Uber over alleged intellectual property theft and patent violation. Lyft is trying to gain an edge and outmuscle Uber to become the largest U.S. ride-hailing provider. It is currently the second largest ride-hailing service in the U.S. by ride volume after Uber.

Deal Details Scant but Intentions Clear

The duo is reportedly working on a self-driving vehicle pilot program, however, the details and scope of it are scant. The companies neither revealed the program’s cost nor provided any details about timing, staffing location or number of vehicles.

We believe that Waymo and Lyft have collaborated at a very opportune moment. Uber is currently not in a favorable position as far as its ongoing legal confrontation with Waymo is concerned. Its request to send the dispute to arbitration was denied by federal judge William Alsup on Thursday, who also partially granted Waymo’s request for an injunction against the former.

If  Waymo eventually wins, it could derail Uber’s self-driving car efforts or at least slow down its pace. This might give Lyft, now backed by Waymo, some time to catch up.

Alphabet Inc. Net Income (TTM)

Partnerships are a Key

Though the self-driving/autonomous car conversation is just getting started, a large number of players including biggest tech players to automakers, chip makers to firms that manufacture components, are increasingly vying for an edge in this competitive and lucrative business.

To gain an edge and leapfrog competitors, many of these players are forming partnerships and sometimes shifting them. Waymo for example has an ongoing partnership with Fiat Chrysler Automobiles N.V. (FCAU - Free Report) and has a fleet of 600 Chrysler Pacificas. It is also in talks with Honda Motors (HMC - Free Report) to get its technology in Honda test vehicles. Lyft has an ongoing self-driving partnership with General Motors Company (GM - Free Report) , which is also a Lyft investor.

Wrapping Up

There is no doubt that the autonomous driving space will see much innovation over the next few years, both by technology companies and automakers, and by smaller startups. In fact, CB Insights estimates financing in the auto tech startup sector have been over $1 billion in 2016 and more investment will surely follow. This is one of the best places to be in because the technology is just being built. Also, early investors can sell off their interest at a nice premium.

Alphabet currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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