Tesla’s (TSLA) newest price cuts in the U.S. have analysts at one Wall Street bank concerned.

Over the holiday weekend, Tesla slashed prices across its vehicle range by 2% to 6%, the fifth price cut for the automaker since January. While the biggest price cuts occurred at the higher end of the range, with the Model X and Model S, a significant cut of around 4% brought the popular Model Y Long Range down to $52,990.

“We expect investors to view price cuts as a negative as it runs counter to TSLA recent commentary (as recently as early March investor day) suggesting strong demand,” Guggenheim Securities Analyst Ronald Jewsikow wrote in a note to investors on Monday.

Guggenheim sees the price cut impact hitting Tesla’s Q2s ASP (average selling price) of around $300, with the bank’s estimate down 50 bps from consensus. ASPs are important for investors and analysts to track as any hit to margins from a drop in ASPs affects future profits.

“All of our demand trend work has pointed to slowing demand into March, with wait times flat to negative (globally) across all models and inventory building,” Jewsikow said.

Of note is Jewsikow’s observation that the Model Y AWD is now listed on the Tesla website, likely meaning it is the highly-anticipated version with the newer 4680 battery pack. Tesla says the 4680 pack is more efficient, and will theoretically become cheaper to produce than Tesla’s current packs.

“As production ramps for the Model Y AWD (and 4680 cells), we would expect the price gap between the base AWD and the LR trims to widen, as we believe the consumer value proposition for the LR version is far more compelling at present for just 6% price premium with the LR offering 18% better range, 4% better 0-60 times and more options (3rd row as example),” Jewsikow said. “We also note that [it] is possible that the base Model Y represents a negative mix shift for US orders in the near term if consumer response to the modestly lower price point is higher than we expect.”

On the positive front, Jewsikow and Guggenheim see Tesla’s note on its website that starting on 4/18 the Model 3 RWD sedan will qualify for 50% of the EV tax credit as a “positive surprise.” The Guggenheim team believed a drop in the credit was expected, even a downright loss of the entire credit, because of the Chinese-soured LFP batteries used in the Model 3 RWD.

“Model 3 RWD qualification for partial EV credits should limit downside pricing risks for that model specifically, and is an incremental positive vs. market expectations,” Jewsikow says. The Model 3 RWD now starts at $41,990 before any tax credits, continuing on as Tesla’s cheapest EV for sale in the U.S.

Following the price cuts, Jewsikow updated his estimates for Tesla’s financials by dropping FY 2023 revenue, EBITDA, and EPS estimates. Despite this Guggenheim maintained its $105 price target, though it is reiterating its sell rating for Tesla shares.

Overall, with March orders running below supply, Jewsikow doubts the U.S. price cuts will be enough to boost sales as the “demand environment remains challenging,” with risks skewing to the downside.

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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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