UPDATE: BofA on Tesla: '300K Reasons to Have Doubt,' Maintains Underperform, $39 Target

BofA Merrill's John Lavallo and John Murphy issued a note on Tesla

suggesting the current share price implies greater than 321,000 in annual unit sales by 2020. The analysts maintain an Underperform rating and $39 price objective on Tesla shares. Lavallo and Murphy called Tesla's current share price "over-valued." With the analysts currently estimating around 20,000 in unit sales for 2013, hitting the 321,000 level would representing a quite-unprecedented 48 percent seven-year CAGR. "While nothing is impossible, particularly with Elon Musk at the helm, we believe these assumptions warrant a healthy degree of skepticism," the BofA analysts said. "We analyzed the lifecycle of over 130 vehicles categorized as luxury by Ward's Auto, the result of which indicate that approx. 70% reach peak volume within the first 8 quarters of launch. In other words, if Tesla's vehicles follow a pattern similar to the industry norm, volumes could begin leveling off within the next year, rather than growing into perpetuity as the current share price would suggest." The analysts warned the company's Q4 gross margin number could be inflated by favorable items for lease accounting and GHG & CAFE credits, making the achievement of this quarterly goal "potentially less meaningful." With Tesla shares trading right around $120 Monday morning, the firm's price target implies potential downside of about 68 percent.