Pacific Crest told investors to be wary of Tesla shares, citing the profit margin risk from increased price discounting.

“Checks indicate Model X orders have improved, but we detected aggressive Model S discounting at U.S. sales centers intended to maximize Q3 deliveries,” analyst Brad Erickson wrote in a note to clients Tuesday.

“So while a strong Q3 delivery number could provide some reprieve for the bulls, our view of declining quality for incremental Model S demand poses ASP and margin risk while calling longer-term demand into question.”

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