Much of Tesla's growth story (TSLA) is based on the idea of the so-called Tesla Network, an autonomous vehicle service that CEO Elon Musk claims will be competing with Uber (UBER) and Lyft (LYFT) ride. The March 6 update to the Tesla website is therefore a shock to investors looking for large revenues from the Tesla network in the near future. The updated website has actually removed all references to the Tesla Network.
It looks like Tesla is quietly withdrawing from the terrific Tesla Network applications, which could lead to serious consequences for the company's growth story and inflated share price
A sudden reversal
The removal of all references on the Tesla network is both sudden and surprising. Tesla did nothing to telegraph the change. During the Q3 2018 earnings call last October, Musk was still lyrical about the capabilities and market potential of the Tesla network:
"We consider the future absolutely a kind of shared electrical autonomy, so that it would be you can ride anyway and share the car. You know such a long-term model, which is probably a combination of Uber, Lyft and Airbnb. There will be Tesla vehicles designed for the trip, and any customer can share their car at will, just as you share your home with Airbnb. It is a combination of these two models. I think it's pretty obvious where things are going in the long term. The advantage that Tesla will have is that we will have millions of cars with full autonomy capability in the field, and nobody else will. I think that will ultimately put us in the strongest competitive position in the long term. "
Musk offered more information about his vision for the Tesla network throughout the win-win. While his language was largely speculative, he went into detail about how the company works. In particular, he envisioned a system that allows Tesla owners to connect their vehicles to the service to generate residual income. At the same time, the company operated a fleet of vehicles designed for Tesla Network's customers.
However, when Tesla updated much of the language last week with the description of its self-propelled technology, many of the most daring safety and performance claims were either watered down or completely undressed. Also, the reference to the Tesla network has disappeared:
"Please also note that using a self-driving Tesla is okay for car sharing and driving with friends and family, but this is only allowed on the Tesla Network, details of which will be released next year. "
This may seem like a harmless change, but that is far from the truth. In fact, this could have serious consequences for the assessment and evaluation of the company by the market.
Massive MaaS Dreams
Musk's bold vision for self-driving vehicles and Tesla's Square at the center of an autonomous network. was a key component of the company's growth story, as well as its treatment as a technology company and not just as a niche maker. Musk's excitement has been contagious to many investors and analysts.
Among asset managers, ArkInvest may have been most excited about Tesla's burgeoning leadership in mobility as a service ("MaaS"). The US $ 4,000 ultra-bullish target that was widely publicized in the media last year is largely based on its forecast of massive growth in Tesla's Maes business:
"Our price target of 4,000 US Dollar Expects Tesla to Be Developed by a Hardware Manufacturer With a Gross Profit of 19% for a company earning most of its profits from Mobility-as-a-Service (MaaS), a company we believe Will reach 80% of gross profit. In the scenario of $ 4,000, our assumptions are conservative: we only make profits with cars and certain autonomous taxi networks, not with trucks, drones, energy stores for energy producers, or the MaaS opportunity in China. "
Arkesvest projects that Tesla can realize this transition within the next five years. Musk himself has mixed with enthusiasm in this story. Earlier this month, he claimed that Tesla's complete self-driving technology would be "fully operational" by the end of 2019 and fully operational.
ArkInvest is by no means alone in this enthusiasm. Morgan Stanley's (MS) Adam Jonas was a perennial driver of Tesla's future autonomous vehicle services, which he described as "Tesla Mobility". As we discussed in a research report last October, Tesla was assigned a $ 291 price target by Jonas amounting to $ 291 for mobility. That's one-third of the company's overall rating in the analyst's eyes.
Unfortunately, these high price targets are based on ambitious dreams rather than concrete realities.
Collision with reality
Tesla's decision to delete the reference to the company Tesla Network is very important. The company has been working on its self-drive technology for years, and Musk has repeatedly opted for the upcoming release. In reality, however, Tesla is still far away in autonomous driving. As we recently reviewed in a research study, Musk's great promises have turned out to be little more than fantasies. It is widely believed that Waymo (Yamaha) (NASDAQ: .2014), General Motors (GM) and Ford (F) have a significant advantage over other autonomous vehicle programs. Tesla was again classified as dead in the latest industry survey by Navigant.
Even worse for Tesla is the growing number of experts who describe their approach to autonomy as fundamentally flawed because LIDAR is missing. As we have already discussed, the use of LIDAR in the case of legalization of autonomous vehicles is most likely dictated by regulations. Tesla, who has not shunned this technology, could declare his technology obsolete before it even has a viable product.
As for the timetable, Tesla has again proved to be very misleading. Top experts and space executives generally recognize that full autonomy is many years away. For example, the CEO of Waymo believes that it will take at least a decade to be state-of-the-art and safe for self-driving cars that drive on public roads.
Musk and Tesla have put forward no compelling reason for their approach will lead to such a radically faster rollout. It seems to be nothing more than an aspiring conversation that is not supported by concrete evidence. Musk has hired such tricks in the past, but that will ultimately affect Tesla.
Investor's Eye View
The valuation praised by Tesla is based on a series of extremely weak assumptions. The notion that the infinite demand for their vehicles will drive massive revenue growth has remained unchanged this quarter, amid growing signs that demand has fallen off the beaten track. Tesla's solar business, another element that is said to be "more than just a car company," has been on the decline for some time now.
Now the program of the autonomous vehicle is disappointing. Even the once-reliable Adam Jonas has turned bearish with Tesla Mobility's near-term outlook. Jonas lowered his price target to $ 260 in his latest research report published after the Tesla website was revised, while Tesla Mobility's value dropped to $ 55. Jonas said that the development of the technology takes much longer than originally expected, and it could take many years – maybe more than a decade -.
Almost every significant factor in Tesla's growth story currently has significant headwinds. Using self-drive, the Tesla network is another collision with reality that can not be surmounted by futuristic predictions.
As the limits of the Tesla network's boundaries become clear, investors should reckon with the price of the stock price.  Disclosure: I am / we are short TSLA. I wrote this article myself, and it expresses my own opinion. I can not get any compensation for it (except from Seeking Alpha). I have no business relationship with a company whose warehouse is mentioned in this article.