Tesla shares jumped more than 10 percent this week, after the electric carmaker announced an upgrade to its Model S line. However, according to one analyst, the automaker could end up eating its own sales with the move.
On Tuesday, the company announced an upgraded version of its Model S line called the 70D. The new all-wheel-drive base level car comes with a larger battery pack, 240-mile range and auto-pilot capability. It also comes with a $75,000 price tag, which is about $5,000 more than the previous version.
"Consistent with our recent downgrade, the new 70 makes the upgrade to the 85D less compelling now and could cannibalize sales of the more expensive model in our view," CLSA America's Tesla analyst Andrew Fung told "Fast Money" this week.
"This would obviously weaken the mix this year, which hits at our concerns around the margin pressure and downward earnings revisions that could happen in the second half of 2015," he added.
Fung downgraded the stock on March 25 to an underperform rating from an outperform rating on concerns that it could face near-term earnings risk from Model X margins. The firm also cut its price target to $220 from $275.
The stock is up about 5 percent since Fung made the call, but he defended the change.
"Beyond the quarter, we still think that given just the operational performance, which has been soft for several quarters and again that potential need to raise additional capital, our expectations are for investors to stay very focused on the margins and earnings outlook for the rest of this year," he added.