If you’ve ever wondered how Wall Street puts a price tag on companies, let me pull back the curtain.

I spent years at an investment bank valuing businesses for M&A deals, tax purposes, and even some bizarre situations – like divorce settlements where one spouse had to cut a massive check to the other.

My job was to figure out exactly how big that check should be.

It was grueling work – long nights, endless spreadsheets, and mind-numbing calculations.

But the skill of valuing companies? That’s been priceless when it comes to investing in the stock market.

One of the best ways to value a company is using the “Sum-of-the-Parts” approach.

It’s exactly what it sounds like: If a company has multiple business lines, you can value each one separately and then add them together to get the overall value of the company.

Using this valuation approach on Tesla (TSLA) and Alphabet (GOOG) recently led me to uncover just how undervalued GOOG is…

The Tesla vs. Alphabet Puzzle

Let’s use this “Sum-of-the-Parts” approach to compare Tesla and Alphabet.

Tesla currently has a market cap of around $750 billion.

If we value its core car manufacturing business like Ford or GM, it’s worth somewhere around $50 billion.

[Here’s the quick math: Tesla earned $7 billion in profit last year. Traditional automakers trade around an 8X multiple. Therefore, Tesla’s valuation would be somewhere around $56 billion. ($7B multiplied by an 8X multiple.)]

That means the remaining $700 billion of Tesla’s value comes from its AI and robotics potential – specifically, the promise of Robotaxis.

But here’s the thing: Alphabet already has fully operational autonomous vehicles on the road.

Waymo (owned by Alphabet) is actively transporting passengers in Austin, Phoenix, San Francisco, and Los Angeles.

I see them outside my window here in Austin every day.

Yet, the market isn’t assigning Alphabet’s self-driving technology nearly the same value it’s giving Tesla’s potential Robotaxi business.

Why?

Breaking Down Alphabet’s Value

Let’s apply the Sum-of-the-Parts method to Alphabet:

• Business #1: Alphabet’s Core Business – Google Search, YouTube, Google Cloud, and ads. This segment generated over $300 billion in revenue last year with ~35% profit margins. Comparable tech giants trade at 20-25 times earnings, which would conservatively put this business at $2.1 trillion in value by itself.

[Note: Alphabet’s current market cap is just $2 trillion, meaning the subsequent businesses are essentially being assigned zero value according to the company’s current valuation.]

• Business #2: Waymo & AI – Waymo is already operating in the real world, while DeepMind is one of the most advanced AI research labs globally. If the market is valuing Tesla’s autonomous potential at $700 billion, shouldn’t Waymo be worth at least that?

Some bulls, like Gene Munster, predict a Waymo spinout by 2027-2029, valuing Waymo at $350 billion to $850 billion if it captures a chunk of the $1 trillion ride-hailing market. Even at the low end, that’s a massive unlock for Alphabet shareholders since Business #2 is currently assigned no value at Alphabet’s valuation.

Let’s split the difference and value Business #2: Waymo and AI at $600 billion.

• Business #3: Other Bets – Alphabet has various moonshot projects, including its health tech and infrastructure initiatives. Let’s assume a $50 billion valuation for these.

Adding everything up, I’m estimating Alphabet’s business segments are worth around $2.75 trillion – conservatively.

That’s 37.5% higher than Alphabet’s current market cap of $2 trillion, suggesting GOOG stock is severely undervalued.

The biggest reason?

Narrative.

Elon Musk is a master at storytelling, hyping up Tesla’s future.

Alphabet, on the other hand, doesn’t push the Waymo story nearly as hard, even though the tech is already here.

At some point, the market will wake up to the fact that Alphabet owns the most advanced self-driving platform in the world.

When that happens, GOOG could see a major re-rating.

In other words, if you’re looking for an AI and Robotaxi play, Alphabet might be the most underappreciated stock in the market right now.

Stick with The Million Mission for more insights like this.

No valuation experience necessary.