Buying Tesla shares as Musk's $29 billion pay package gets green light

Tesla (TSLA) stocks opened at $307.78 on August 5, 2025, after the board approved a new compensation package for Elon Musk worth approximately $29 billion, comprising 96 million shares. This decision was made to retain the company's CEO amid ongoing legal challenges to his 2018 pay deal, which had previously been deemed illegal. The move sparked a bullish market reaction, reversing Tesla's long-term downward trend. 

Despite the positive sentiment, the stock's momentum is still being held back by a number of underlying challenges. Markets have fully digested the 8.4% contraction in Chinese sales in July and the weakening of global deliveries. Current TSLA valuations also reflect mounting competitive pressure from BYD, Xiaomi, and BMW, as well as documented share loss in both the European and American markets last month. Ongoing regulatory burdens, such as shrinking emissions credit income and legal liabilities like the $329 million Autopilot settlement, further dampen growth expectations and create sustained downward pressure on the stock price.

Tesla shares could rally to between $350 and $400 if two critical catalysts materialize: successful expansion in China with the updated Model Y and improved margins from deploying robotaxis. This is especially likely if the Federal Reserve cuts rates in September, which would ease financial strains. However, there are significant downside risks. A continued sales slump may drive stocks down to $250–$280. This decline could accelerate if courts uphold challenges to Musk's original compensation package, potentially creating leadership uncertainty. Additional pressure comes from stagnant European demand, intensifying competition, and potential new tariffs under the Trump administration that would raise auto parts’ costs.

Technically, after a long decline, Tesla stock is now attempting to reverse, as indicated by the formation of several consecutive green candles. The Stochastic Oscillator (with parameters 5, 3, 3) is in the neutral zone. Meanwhile, the %K line is crossing the %D line from bottom to top. This confirms the emergence of a local bullish signal and supports the short-term recovery scenario.

The following recommendation comes into play:

Buy at the current price with Take Profit at $325 and Stop Loss at $298.

This forecast is valid from August 5 to August 12, 2025.