In a research note to investors, JPMorgan analyst C. Stephen Tusa says he remains negative on General Electric shares and that he now views $24 per share as a “ceiling as opposed to a floor prior.”

WORSE THAN EXPECTED: In a research note titled “Preparing For The Fall: It’s Worse Than We Think.”, JPMorgan’s Tusa told investors that he remains negative on General Electric shares, reiterating an Underweight rating and a $22 price target on the stock. The analyst argued that he now views $24 per share as “a ceiling as opposed to a floor prior,” with something in the high teens as an “investable fair value”. Further, Tusa said he sees downside risk to his well below consensus estimates, while noting that the move lower is an “adjustment to reality,” not cyclical, driven by structural weakness in Power, a less than expected bounce in Oil & Gas and Transportation, and more of a GAAP approach to reported numbers. The company’s cash position is not inflecting, thus current levels are a run rate, not “depressed,” Tusa wrote. Further, he argued that while he is not changing his estimates as of yet, Tusa sees a downside scenario to around 2018 GAAP EPS in the $1.15-$1.20 range as a potential starting point, compared to current consensus of about $1.70, which is already down materially over the past year from the $2 set by management, and lower than the $1.89 heading into the second quarter results.

UP NEXT: The analyst pointed out that the next big event for GE will be its third quarter report in mid-October, followed by a state of the union from the new CEO in mid-November, and then perhaps an accounting teach-in to provide additional perspective for investors on things like LTSAs/contract assets, and the impact on earnings and cash flow over time.

PRICE ACTION: In afternoon trading, shares of General Electric have dropped about 3% to $24.15.

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