A Waymo bull just got way more bullish. 

Morgan Stanley tech analyst Brian Nowak said Tuesday the Alphabet (GOOGL) owned autonomous driving unit Waymo may be worth $175 billion instead of his prior estimate of $75 billion. That would represent a good chunk of Alphabet's $855 billion market cap. 

Nowak models for Alphabet's stock to reach $1,550, up from $1,237 currently. Here is Nowak's Waymo call deconstructed. 

$80 Billion Autonomous Taxi Valuation

Says Nowak:

"We believe Waymo remains on track to launch an autonomous ride hailing service in Phoenix this year. We have detailed this business before and our latest model - assuming Waymo charges consumers an average of ~$0.90/mile over the next 20 years and reaches ~4% of global miles traveled ex China and ROW by 2040 - shows how it could be worth ~$80 billion. This assumes a potentially conservative 12% long-term margin (expecting continued investment and falling/competitive pricing) and every 100 basis point change in 2040 operating margins yields an extra ~$5 billion of value."

Lookout, Uber.

$90 Billion Logistics Business

"Partnerships with Walmart (WMT) , DDR Corp. (DDR) and Peterbilt speak to Waymo's logistics focus," Nowak says, adding it should allow the company to better compete with Amazon on the logistics front.

"On long-haul, we see Waymo's autonomous technology addressing the global truck driver shortage and leading to 30-50% lower trucking costs and higher utilization. Our Waymo model assumes logistics revenue reaches ~$330 billion by 2040, 8% of the addressable global freight market," says Nowak.

Here's why Jim Cramer is bullish on Alphabet

$7 Billion Licensing Opportunity

"The Fiat Chrysler (FCAU) relationship speaks to how FCA could pay a license fee to Waymo for its autonomous technology...which they could then use to manufacture self driving cars to be sold to retail customers," Nowak thinks.

"This is likely the beginning of similar relationships with other OEMs as (like search) we see autonomous technology being winner take most as scale improves the algorithm and creates the smartest/safest autonomous offering. We value this high-margin revenue stream at ~$7bn assuming Waymo-powered units reach high teens share of US L4+L5 vehicles (of 7% of total vehicles) by 2040," estimates Nowak.

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