Piper Jaffray analyst Alexander Potter told investors "robo-taxis" should begin winning share from transportation network companies like Uber and Lyft starting in the early 2020s and could spark a fundamental shift in the way society functions. While pointing out that General Motors (GM) is his favorite way to invest in this theme, the analyst downgraded Ford (F) to Neutral as he believes the company may have advantages in the autonomous vehicle segment but is not a leader in this market.

ROBO-TAXIS TO SPARK FUNDAMENTAL SHIFT: In a research note to investors, Piper Jaffray's Potter argued that "robo-taxis" will begin winning share from transportation network companies, or TNCs, like Uber and Lyft starting in the early 2020s. By the end of his 10-year forecast period, the analyst believes TNCs and "robo-taxis" will combine to generate gross revenue of more than $200B per year in the U.S. alone. Once per capita urban ridership approaches 1 ride per day, annual revenue could approach $1T, he contended. Potter believes that like smart-phones, "robo-taxis" could spark a fundamental shift in the way society functions. The analyst pointed out that he divides the "robo-taxi" market into two competitive categories, with vertically-integrated auto makers such as General Motors and Tesla (TSLA) battling against companies that prefer a "consortium" approach like Google (GOOG; GOOGL), Aptiv (APTV), Lyft, Uber, or BMW (BMWYY). There might not be room for more than a few winners from each category, he contended, adding that he sees General Motors as the best-positioned to win, with Aptiv also "worth a bid."

GM VALUATION NOT REFLECTING 'ROBO-TAXI' BUSINESS: In a separate note, Piper Jaffray's Potter told investors that General Motors' "budding robo-taxi business" is wrongly being valued at zero. The analyst's city-by-city ride-hailing model indicates a market opportunity that could exceed $1T in the U.S. alone. GM's "valuation does not reflect this opportunity (not by a longshot)," Potter noted, adding that investors should be buying the stock. The analyst raised his price target on GM shares to $57 from $52, while reiterating an Overweight rating on the stock.

FORD CUT TO NEUTRAL: Meanwhile, in conjunction with an analysis on the outlook for autonomous "robo-taxis," Potter downgraded Ford to Neutral from Overweight and lowered his price target on the shares to $12 from $14. The analyst argued that while the stock's valuation appears low, he is less convinced that Ford can find compelling revenue drivers to offset secular threats. With U.S. vehicle sales slowly eroding, investors are looking for more fundamental changes from Ford and from automotive companies in general, he contended. While the company may yet capture its share of the $1T market for autonomous rides, the analyst highlighted that Ford is not a leader in this market. With so many other "blocking-and-tackling" projects consuming bandwidth, Potter is not sure Ford is ready "to start blazing new trails in earnest."

PRICE ACTION: In morning trading, shares of Ford are fractionally up to $11.24, while General Motor's stock has gained about 1% to $36.89.