Investing.com -- Tesla CEO Elon Musk is facing a “code red situation” with the company at a major crossroads, according to Wedbush analyst Dan Ives, who urged Musk to distance himself from his political affiliations and refocus on Tesla’s core business ahead of its crucial earnings report next week.

“We are now at a major crossroads for the Tesla (NASDAQ: TSLA ) story,” Ives wrote in a note, warning that Musk’s involvement with the Trump Administration and DOGE has caused widespread brand damage and triggered a wave of negative consequences for Tesla.

Since Musk’s political alignment became more pronounced, “Tesla has now unfortunately become a political symbol globally,” Ives said. “Tesla’s stock has been crushed,” and protests and even violence against dealerships and owners have erupted.

There is “potentially 15%-20% permanent demand destruction for future Tesla buyers due to the brand damage Musk has created with DOGE,” he added.

Tesla reported a weak first-quarter delivery number, and Street estimates for 2025 deliveries have already dropped from 2 million to around 1.65 million. EPS projections are “now around $2 and could go lower,” Wedbush noted.

Still, Ives remains bullish long term, calling Tesla—along with Nvidia—one of “the most disruptive technology companies on the globe.”

But he emphasized that recovery hinges on Musk stepping away from politics. “Musk needs to leave the government, take a major step back on DOGE, and get back to being CEO of Tesla full-time,” argues Ives.

On the upcoming earnings call, the analyst said investors will be looking for updates on full self-driving timelines, the rollout of a lower-cost vehicle, and the company’s roadmap for AI and robotics.

This is “a fork in the road time,” Ives warned. “If Musk chooses to stay with the Trump White House it could change the future of Tesla/brand damage will grow.”