Demand for Tesla’s Model X SUV is lagging, and until the EV firm proves it can deliver volume and profits, it would be best not to invest in its stock, believe analysts at Pacific Crest.

It's Better To Avoid Tesla Motors Inc Stock For Now: Analysts

Lagging demand to blame

Pacific Crest analysts also lowered their expectations for the company’s revenue, earnings and other relevant metrics. In a note to clients on Tuesday, the analysts said they are “incrementally more cautious on overall Tesla demand.” They checked with U.S. sales centers and found that Model X orders were running behind expectations.

“While getting the X to showrooms would help, we don’t expect that to happen until later this spring due to production challenges,” the analysts noted.

For the fourth quarter, Pacific Crest expects Tesla to deliver 17,400 vehicles, which is lower than the previous expectation of 17,820 vehicles. For 2015, they now expect the firm to deliver 50,580 units versus an earlier estimate of 51,000. The revenue forecast has been slashed to $1.73 billion from $1.78 billion earlier. For the full year, expected revenue has been revised down to $5.32 billion from $5.38 billion earlier.

Tesla is expected to unveil the Model 3 in late March, and Pacific Crest analysts see it as a “positive catalyst still out there.” The mass-market vehicle could cost somewhere around $35,000, and the company is expected to start accepting orders beginning March.

Pacific Crest analysts noted that the demand for the Model S sedan is likely reaching a ceiling. They gave a Neutral rating to the stock but also warned about potentially downgrading it if they see further evidence of a lack of demand.

Second negative note on Tesla

This is the second negative analyst note on Tesla in the past two days. On Monday, Morgan Stanley’s Adam Jonas, known as the biggest Tesla bull, cut his price target on the stock from $450 to $333, citing lower volumes for the Model X, the Model S sedan and the coming Model 3. The Model X made its debut in late September.

On Tuesday, Tesla shares closed down 7.19% at $182.78. In the past three months, Tesla’s shares have seen a decline of 11%, while in the past 12 months, they are down 9.5%, versus a decline of 9.2% and 5.5% for the S&P 500 Index, respectively.