Barclays (LON:) analyst Brian Johnson sees Tesla’s (TSLA) Q2 earnings coming in below expectations.

An analyst maintained an Underweight rating for Tesla (NASDAQ) and raised the price target from $325.00 to $370.00 per share based on better baseline auto earnings.

“As Tesla CEO Elon Musk grapples with outside business pursuits, the company’s 2Q production and margins are set to disappoint as Shanghai shackles output. Indeed, we now expect sales and production to contract Q/Q (vs consensus expecting growth) with Shanghai’s ramp to pre-lockdown levels taking longer than expected and, to a lesser extent, Texas and Berlin experiencing slower-than-expected ramps. We reduce our 2Q EPS to $2.08 from $2.72 and $2.19 consensus, as our 2Q delivery estimate falls to 251k from 315k prior and 303k consensus,” Johnson told clients in a note.

He also spoke out about the slower-than-expected growth in Berlin and Texas.

“Tesla’s Berlin factory appears to be facing several issues including quality, supply chain, and lack of 2nd shift employees…It appears Tesla has only achieved a daily production rate of ~86 units/day as of mid-May, with the company planning for ~350 units/day from the second half of July with localized production of drive units expected to begin this month. For Texas we lower our 2Q production forecast to 5k units, from 17k, as Tesla may be struggling with new manufacturing processes related to the 4680 structural battery pack and Giga casting,” Johnson added.

Despite the evident Q2 risk due to China lockdowns, the analyst argues that “the market may swing trade TSLA shares up as it puts a Covid-driven poor 2Q in the rear view mirror.”

Moreover, Johnson is also confident that the company will still record positive FCF in Q2 as “bearish expectations for negative FCF in the quarter are overdone.”

On job cuts, the analyst says Musk’s internal memo fits with Q2 EPS/FCF risk.

Reuters earlier today reported that Tesla expected to see the Shanghai plant’s Q2 production output drop by a third. Continue reading here.

By Senad Karaahmetovic