Despite his age I still think Real Madrid should have given him more playing time even before now, in the Champions League he gave them the opportunity of getting to the final but he wasn't a first team player and now we have Mbappe joining the team is still going to be hard for Joseluto fit in, no space for him in the Madrid team. I think Joselu should leave the team with the injury of Mbappe things are still not going to change is best he leaves than becoming a bench warmer, signing a new contract is a bad move, such talent shouldn't be kept on the bench to waste, for Madrid to sign him I believe he's going to be as a reserve player.
Joselu was not signed to be a regular striker in Madrid. From my observation, he came to Madrid as a backup striker to other younger players. Carlo Ancelotti wanted a striker who would be on standby while they waited for the arrival of Kylian Mbappé. The signing of the French striker has put Joselu in a tight corner which will make him have little or no playing time in the club. He already knows his place and signing a new contract will depend on the options he has. If there is interest from some top clubs to get him, then he should consider moving out of Madrid. But it will be better for him to remain in Madrid if he has no option. He has already made a mark in Madrid so he should remain and enjoy his earned reputation. Real Madrid will be competing in many competitions, maybe he will still be able to play a few games.
True about the many competitions Madrid has but if we have to count how many games Joselu will start or play it won't be an impressive number starting from next season and him joining as a supporting striker it seems like he's not even included in the main squad, he should be playing with the Madrid B team if is so. But still on still Madrid isn't a club to be in while you have Mbappe joining as a striker, that's if you're playing same position, you'll find it hard to even make the sub list.