J.C. Penney Company, Inc. (NYSE:JCP) has certainly had its fair share of drama over the last year or so, and now Morgan Stanley analysts have cut their price target for the company’s stock even further. They reiterated their Underweight rating and lowered their target from $6 per share to $4 per share.

J.C. Penney

J.C. Penney keeps coming up short

Analysts Kimberly C Greenberger, Jay Sole and Duo Li say J.C. Penney Company, Inc. (NYSE:JCP)’s slow undermines the quick recovery thesis other analysts have in mind. Although the retail chain did finally report its first positive quarterly comp in nearly three years, continued month to month deceleration remains a problem for it.

Their estimates remain below consensus, and J.C. Penney Company, Inc. (NYSE:JCP) would need its sales to accelerate in order to meet their low estimates. Their forecast also yields $700 million in cash burn this year and keeps the company’s free cash flow in the negative until 2016, and that’s in what they see as the retailer’s best-case scenario.

J.C. Penney’s liquidity concerns might return

Because J.C. Penney Company, Inc. (NYSE:JCP)’s cash burn situation is expected to continue for some time, the Morgan Stanley team sees negative free cash flow until 2016 and negative adjusted earnings per share until 2017. They say this leaves “little to support equity level at this level” and note that if the retailer continues to struggle, the liquidity concerns it solved late last year with its recent public offering could return.

They note that shares of J.C. Penney Company, Inc. (NYSE:JCP) have declined 44% so far this year, breaking through their previous $6 per share price target. As a result, they adjusted their target lower, deriving it from applying a peer average EV / EBITDA multiple to their 2017 estimate and then discounting back after making adjustments for debt. They believe even their base case could end up being too optimistic, so they will reassess their estimates after the retailer releases its fourth quarter earnings reports and updates guidance for 2041. J.C. Penney’s earnings call is scheduled for Feb. 26 after closing bell.