Tesla shares will fall dramatically the rest of this year due to its high valuation and rising competition, according to J.P. Morgan.

The firm reaffirmed its underweight rating on Tesla shares, saying other automakers may price their electric cars aggressively.

Tesla has a "highly differentiated business model, appealing product portfolio, and leading-edge technology, which we believe are more than offset by above-average execution risk and valuation that seems to be pricing in a lot," analyst Ryan Brinkman said in a note to clients Friday. "We have highlighted more concerns regarding increased competition, including from automakers looking to use the sale of battery electric vehicles to subsidize their more lucrative internal combustion engine portfolio vehicles from a legal, regulatory, and compliance perspective, rather than trying to generate profit on the sale of these battery electric vehicles in and of themselves."