Bank of America Merril Lynch thinks Tesla is an expensive stock.

But in a note on Thursday, the firm raised its price target on the stock to $180 from $65, a 177% increase.

BAML maintains an "Underperform" rating on shares.

Tesla shares closed at $269.15 on Wednesday.

In a note, BAML wrote:

While we continue to view Tesla as an important catalyst for the auto industry and electric vehicle (EV) market specifically, we believe its shares remain overvalued.

The firm added:

In our view, the company could be successful in the long term as [a] niche focused company, as demand for alternative drivetrains accelerates. However, in the near term, we expect consumer pull and regulatory push for auto fuel efficiency to be met primarily with downsized, turbocharged, internal combustion engines on lighter vehicles. Therefore, we believe EVs are likely to remain more niche for the foreseeable future, while company-specific initiatives will continue to challenge earnings, cash flow, and returns in the near-term.

BAML also listed over a dozen issues that face the company in the coming years.

Here are six of them:

The delay of the hugely anticipated "Model X" launch.

The Model 3 could be launched soon, but the analysts aren't sure if it can be profitable. And the eventual launch of Model X could dampen demand for Model 3.

Tesla's battery packs may not be very different from others already on the market. And at current prices, Tesla's battery packs are more expensive than more widely distributed alternatives.

Breaking into China may be more challenging than planned. CEO Elon Musk had said in the fourth quarter that demand was weak.

Even if everything goes well for the company, the analysts aren't sure what the stock's fair value is.

Margins "appear to be tough, and could get worse."

Tesla shares were up about 2% in early trading. They've rallied about 21% year-to-date, and 12% over the past 12 months.

On Thursday morning, the company said it delivered 11,507 Model S cars in the second quarter, up 52%, and a record.