Last week, the Wall Street Journal thrust Tesla (TSLA) shares into a frenzy with a report that its board of directors had opened a search to replace Elon Musk as CEO. Company leadership, including current Chair Robyn Denholm, promptly denied the allegations.
Investors will note that the reported CEO search comes as the electric vehicle manufacturer faces multiple challenges in 2025, ranging from slowing consumer demand to narrowing profit margins. In Q1 2025, Tesla stock reported a 71% drop in earnings, while the stock is down almost 45% from all-time highs.
Critics point to Musk’s divided attention between Tesla and his other ventures. This includes his new role in President Donald Trump’s administration, a key factor in the company’s recent struggles.
However, replacing Musk may not be an answer to the board’s concerns.
In a post on X, Gary Black, managing partner at The Future Fund, explained that if Musk was asked to step down as CEO but stayed on as CTO or another such role, Tesla’s stock could drop 5% to 10%. He emphasized that a complete departure could trigger a 20% to 25% decline, wiping out nearly $220 billion in shareholder value. Musk forcefully rejected the Wall Street Journal’s report, calling it an “extremely bad breach of ethics” and “deliberately false.”
Analyst Dan Ives of Wedbush Securities believes Musk will remain CEO for at least five more years. He suggested the board’s actions might serve as a “warning shot” amid growing strategic uncertainty and mounting competition, particularly from China.
Should You Buy Tesla Stock Right Now?
In Q1 2025, Tesla reported revenue of $19.34 billion, a decline of 9.2% year over year. In the same period in 2023, it reported sales of $23.3 billion. In the last two years, the company’s gross margins have narrowed from 19.3% to 16.3% while operating margins have declined from 11.4% to just 2.1%.
Tesla shares rallied following the company’s first-quarter earnings report, despite posting disappointing financial results that fell short of analyst expectations. The EV maker reported a 20% year-over-year decline in automotive revenue and a sharp drop in net income. Tesla also indicated it would “revisit” its 2025 guidance when providing its second-quarter update, creating uncertainty around its full-year outlook.
Musk announced during the earnings call that he would significantly reduce his time with the Department of Government Efficiency starting in May. This commitment reassured investors who were concerned about Musk’s divided attention between Tesla and his White House duties.
Tesla also noted that evolving trade policies could adversely impact its global supply chain and cost structure. Despite these headwinds, Tesla reaffirmed its commitment to launch a pilot robotaxi service in Austin, Texas, by June and begin building humanoid robots on a pilot production line in Fremont, California, this year.
Tesla’s energy generation and storage segment provided a bright spot, with revenue jumping 67% to $2.73 billion. Musk highlighted growing opportunities for its energy storage products to support AI infrastructure and grid stabilization.
What Is the Target Price for TSLA Stock?
While TSLA stock is down 40% from its 52-week high, it continues to trade at a premium. For instance, Tesla stock is priced at 144x forward adjusted earnings, above its five-year average multiple of 115x.
While analysts remain bullish on Tesla, investing in the tech giant right now does not seem compelling given its limited upside potential. Out of the 41 analysts covering TSLA stock, 16 recommend “Strong Buy,” two recommend “Moderate Buy,” 13 recommend “Hold,” and 10 recommend “Strong Sell.” The average target price for TSLA stock is $283.14, below its current trading price.
