Morgan Stanley's Adam Jonas, who was one of the most bullish Tesla analysts, cut his rating on the electric car marker to equal weight from overweight, citing increasing competition from larger technology companies.
Jonas is known for having some of the most aggressively bullish predictions on Tesla's ambitions including a note highlighting an Uber-like transport service with autonomous electric vehicles published last year. Tesla shares closed down more than 2 percent Monday after the analyst's Monday note made the rounds on Wall Street.
"The bull case on Tesla is that it can become the next Amazon or Apple. We see such firms as competitors ultimately. We question whether the risks of going head-to-head vs. the tech giants is sufficiently discounted in the price," Jonas wrote in the note to clients. "We expect much larger and more well-capitalized competitors to unveil strategies that directly address sustainable transport and mobility."
Tesla is one of the best-performing stocks in the market this year. The company's shares are up 47 percent year to date compared with the S&P 500's 7 percent return.
Jonas reaffirmed his $305 price target for Tesla, representing 3 percent downside from Monday's closing share price of $315.88.
He cited recent developments such as Waymo, an Alphabet-affiliated autonomous technology driving firm, expanding its fleet by six times and Apple securing a permit in California for autonomous driving as further evidence large tech companies are encroaching on Tesla's space.
The analyst also pointed to these other key risks for Tesla:
In another report Monday, Goldman Sachs analyst David Tamberrino reiterated his sell rating and $190 price target for Tesla due to "potential Model S cannibalization" from the company's upcoming Model 3 car.
— CNBC's Michael Bloom contributed to this story.