With Tesla set to report earnings, bulls are more nervous than they have been in a while and the main reason for rising concerns, as Vertical Group's Gordon Johnson explains, is that the company recently guided 4Q margins lower despite higher 4Q shipments.

As Johnson elaborates, despite TSLA:

guiding ’18 CAPEX to <$2.5bn, below ‘17’s $3.4bn, cutting 7% of its workforce this past Fri. (after cutting 9% of its employees Jun. ’18, where E. Musk boldly predicted the company would “never have to do this again”), ending its referral program (which was seen as providing “endless” demand at no marketing cost), and killing its entry level 75kWh Model S & X (which accounted for ~80% of all Model S/Xs sold in ’18),

... all of which portend slowing growth the bull case on TSLA still centered on the thought that the more Model 3s produced the higher company margins would ascend.

Yet, as detailed here, despite deliveries growing +8.6% q/q in 4Q18, Musk expects 4Q18 GAAP profit to lag that reported in 3Q18. Or said otherwise, "while still trading at a forward P/S multiple of ~2x (vs. 0.37x for GM), the TSLA “growth narrative” appears to have died a sudden death."

So after declaring that the Tesla growth story has seemingly ended with a whimper, Johnson provides his Tesla model update, where he offers the following key highlights:

We see a Modest EPS Miss in 4Q18, Followed by a Sizeable EPS/Delivery Miss in 1Q19. After adjusting our bottom-up 4Q18 earnings driver model to reflect car delivery growth of +8.6% q/q, $190mn in 4Q18 ZEV credit sales, 22% auto seg. Margins, & +20%/-36% margins in the Storage/Services segs., we arrive at 4Q18 rev/EPS of $7.1bn/$0.79 (Street $7.1bn/$1.02). Furthermore, we have updated our 1Q19 ests. to reflect:

US Model S/X deliveries down -27.5% y/y (to capture TSLA’s US FIT being cut in half 1/1/19, as well as the fact that US Model S/X deliveries surged to ~57% of global S/X cars sold in 2H18, vs. just 45% in 1Q18 [implying a material amount of demand was pulled forward]), EU Model S/X sales moderating -30% y/y (due, primarily, to our forecast for an 80% y/y fall in sales to the Netherlands (“NL) [the tax on EV cars priced >€50K sold in NL jumped from 4% to 22% 1/1/19, which drove acute demand pull-in last yr – while ’18 Model S/X sales into the EU rose +6% y/y, had NL’s sales been flat for the yr, overall S/X EU sales would have declined -13% y/y), RoW Model S/X sales down -10% y/y, Model 3 sales falling -42% q/q to ~37K (20K US/~12K EU/5K China) at 17% margins (due to $2K price cut),

similar q/q fundamentals in the storage/service segs., and $1bn in OPEX (lowest level since 4Q17).

On these adjustments, Vertical Group's new 1Q19 rev/EPS ests. are $3.5bn/-$2.57 , far below the street's consensus estimate of $6.8bn/$0.09.

Looking ahead, and factoring Porsche’s decision to make 40K Taycan’s in ’19 vs. prior plans for 20K, as well as competition from auto veterans Audi/Jaguar, Johsnon's new ‘19 rev/EPS of $14bn/-$10.49 imply big cuts on-tap to Cons’ rev/EPS ests. ($28.8bn/$2.13).

Putting the above together, Johnson's already lowest on the street 2019 TSLA price target edges even lower, because holding Vertical Group's 0.74x P/S multiple on the firm's new ’19 rev est. of $14bn, Johnson's new year-end 2019 price target drops to $72 (-75% downside) from $88.

Will Johnson's traditionally apocalyptic Tesla forecast be accurate? Find out in just a few more hours.