Tesla (TSLA) Chief Executive Elon Musk should distance himself from his role in the Trump administration and refocus on the electric-vehicle manufacturer amid ongoing challenges, according to Wedbush Securities.

The brokerage believes Musk faces a "code red situation" if he remains in his leadership post at the Department of Government Efficiency, or DOGE, which was created by President Donald Trump to maximize governmental efficiency and productivity. Tesla is scheduled to release its latest quarterly results this week and Wedbush expects Musk to address whether he plans to stay or leave his role within the White House.

Musk's work with the government has cast a political spotlight on Tesla and damaged the company's brand, Wedbush said in a Sunday client note. Trump's 25% tariffs on imported passenger vehicles and certain auto parts are expected to delay future lower-cost models for the EV maker, which has also faced protests and violence across its dealerships around the world, the brokerage said.

Earlier this month, Tesla posted sharp declines in first-quarter deliveries on sequential and annual bases amid softening demand in key markets.

Tesla's shares have dropped 36% year-to-date and were down nearly 3% in Monday's premarket activity. However, Wedbush remains bullish on the stock as it believes Tesla is one of the "most disruptive" technology companies in the world over the coming years.

"The unparalleled innovation, engineering scale, autonomous roadmap, and robotics future will unleash massive valuation upside over the coming years in our view," Wedbush analysts Daniel Ives and Sam Brandeis wrote in the note. "But, Musk needs to leave the government, take a major step back on DOGE, and get back to being CEO of Tesla full-time."

Wedbush also expects Musk to reveal details on his turnaround vision for the company during the earnings call this week. The brokerage said Musk "needs to" provide guidance on key topics such as the full self-driving launch, a timeline on when new lower-cost vehicles go into production and the potential impact of tariffs.

Wedbush maintained its outperform rating on Tesla's stock with a 12-month price target of $315.