Competition is weighing on Tesla's sales, according to A.B. Bernstein.
The firm said increased competition abroad is responsible for the recent weakness in Tesla's sales volume.
"Our analysis suggests that the deteriorating sales trajectory of the Model S and X may be primarily due to competition, particularly in Europe, from Jaguar and Audi," said Bernstein's senior technology analyst, Toni Sacconaghi, in a note to clients on Wednesday.
Tesla's financials have been weighed down this year due to Model S and X volumes falling, the analyst said. In the first half of 2019, Model S and X gross profit dollars fell 57% year over year, Bernstein notes. Typically, Tesla produces about 20,000 to 25,000 Model S and X cars each quarter, but a drop in orders brings the average to around 14,000 per quarter. Tesla's stock has reflected the weakness, as it has plummeted more than 30% this year.
Sacconaghi said Tesla's sales weakness is brought on by competition, specially in Europe. New European luxury vehicles like the Audi E-Tron and the Jaguar I-Pace are all taking market share. Anticipated releases from Mercedes and Porsche could worsen the problem, he said.
The total market for these luxury electric vehicle's (more the $60,000) has grown only modesty in 2018 and 2019, and Tesla's sales volume has decreased.
"In other words, the market isn't growing much, and Tesla is losing share," said the analyst.
Sacconaghi is often the top tech analyst in the annual rankings from Institutional Investor magazine. His tech stock picks have an average one-year return of 21%, according to TipRanks, which places him among the best on Wall Street.
Shares of Tesla fell 2.2% on Wednesday.
Bernstein reiterated its market perform rating on the stock and its $325 price target. Tesla closed Tuesday $225.
— With reporting from CNBC's Michael Bloom