On Wednesday, JPMorgan reiterated its Underweight rating on Tesla (NASDAQ:TSLA) with a price target of $115.00. The firm highlighted concerns over Tesla's second-quarter performance, noting softer automotive adjusted gross margin and weaker free cash flow than expected, which could indicate a risk of negative earnings revisions.
Tesla's second-quarter automotive adjusted gross margin was reported at 14.6%, which is below JPMorgan's estimate of 14.9% and significantly lower than the consensus estimate of up to 16.4%. Additionally, Tesla's free cash flow for the quarter came in at an inflow of $1,342 million, falling short of JPMorgan's expectation of $2,637 million and the consensus figure of $1,949 million.
The analyst pointed out that the first half of the year's free cash flow remained in the negative at -$1,189 million. This poses a risk to the consensus free cash flow forecast of $2.4 billion going into the quarter. JPMorgan has adjusted its own forecast, reducing it from $2.5 billion to $2.0 billion.
The firm also made a comparison with General Motors (NYSE:GM), which reported $5.3 billion in second-quarter free cash flow and guides to $9.5-$11.5 billion for the full year. This is in stark contrast to Tesla's performance, especially considering GM's current equity valuation of $52 billion versus Tesla's $786 billion.
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