Tesla (TSLA) stock sank 5.5% on Wednesday, its steepest loss in two months, after one analyst on Wall Street cautioned it was time to take some money off the table.

In a note to investors on Wednesday, Barclays analyst Dan Levy downgraded Tesla shares to Equal Weight from Overweight, claiming the recent rally ignored near-term questions about the stock’s fundamentals. Though Tesla doesn’t exactly trade on fundamentals — it currently trades at a forward P/E of 80 — Levy does make some interesting points about where Tesla stock sits compared to only a month ago.

“We believe the stock’s recent rally can be best explained by the market’s current AI-driven thematic trade, as well as excitement over recent announcements to open the TSLA Supercharger network to other brands,” Levy said in his note. “Yet while we aren’t surprised that the stock has participated in the rally, we believe it is prudent to move to the sidelines.”

Levy’s main thesis for the downgrade rests on three main points: the AI effect that may be overblown, Tesla’s recent Supercharger deals and uncertain benefits, and, most importantly, how multiple expansion is really the “entirety of the rally.”

As for AI, the recent run-up in Nvidia and other AI-related stocks that looped in Tesla made sense because of the company’s ventures like FSD (full self-driving), its Dojo supercomputer, and the Optimus robot (though somewhat ironically CEO Elon Musk has warned about the dangers of AI). Levy however believes AI is a “long-dated” opportunity for Tesla, not something that can be counted on right now to considerably boost its valuation.

Similarly, Tesla’s charging deals with Ford, GM, and Rivian are seen more as creating “marketing benefits” for Tesla, with any gains again probably coming in the long term, Levy says.

The biggest factor for the ~$300 billion run-up in Tesla stock has been its expanding multiple, Levy said. Tesla’s near-term fundamentals haven’t changed, and while other AI-related stocks have seen positive profit revisions that led to market cap increases, this isn’t the case for Tesla.

Levy believes a number of factors fly in the face of that ballooning multiple, including that Barclays believes Tesla’s 2024 consensus EPS estimates are still too rosy and need to be brought down. In addition, Tesla’s margins are still “uncertain” given recent price cuts, though it is possible margins may have troughed. Finally, more price cuts may be necessary as Model 3 inventories look bloated, and increased Model Y production in Giga Austin and Berlin may necessitate further price reductions, again hurting margins.

All that being said, Levy is still long-term bullish on Tesla’s prospects, just not a buyer at these levels. “We continue to see TSLA as the long-term winner amongst OEMs in the race to an EV world,” Levy says, but “near term fundamentals need to be considered.”

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Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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