Tesla TSLA +3.64% has been buffeted by concerns over Elon Musk’s battle with Twitter, its high valuation, China’s Covid lockdowns, and the market’s recent disdain for high valuation growth stocks. Now, investors can add bitcoin to that list of woe.
Barclay’s Brian Johnson said recently that Tesla’s (ticker: TSLA) bitcoin holdings could result in a $460 million hit to second-quarter earnings.
Tesla invested $1.5 billion in Bitcoin back in January 2021. Bitcoin was north of $30,000 back then. After a few gains and losses, Tesla’s carrying value on the roughly 42,000 coins held was about $1.26 billion at the end of the first quarter of 2022.
Bitcoin ended the second quarter at $18,731.30, giving the automaker a loss of roughly $11,270 a coin or $460 million in aggregate.
When bitcoin falls below its holding value, just like many other assets, companies are required to take a charge. Accounting rules require companies to hold many assets at the lower of the value they purchased them at, or the market value. That is the category bitcoin falls into.
Tesla investors, of course, know what’s been going on with bitcoin lately so there shouldn’t be any surprise. Still, investors should be ready to see a bigger than usual difference between adjusted earnings and earnings based on generally accepted accounting principles, or GAAP.
Wall Street currently expects Tesla to report second-quarter adjusted earnings per share of about $1.80, down from EPS of $3.20 reported in the first quarter of 2022. Covid lockdowns in China constrained production. Tesla delivered about 255,000 units in the second quarter, down from about 310,000 units in the first quarter.
Tesla is due to report second-quarter numbers on Wednesday, July 20. A conference call will follow the release at 4:30 p.m. eastern time.
Coming into Monday trading, Tesla stock is down about 32% year to date.
The bitcoin charge isn’t impacting the stock Monday. Shares are up about 2.1% in premarket trading. Johnson actually took his target price to $380 from $370 a share. He still rates Tesla shares Sell. Deutsche Bank analyst Emmanuel Rosner also put a “catalyst call: buy idea” on Tesla stock to start the week.
That means it’s a timely buy call because he expects the stock to move higher in the coming days or weeks. Rosner rates Tesla stock Buy and has a $1,125 price target.
S&P 500SPX +0.82% and Dow Jones Industrial AverageDJIA +0.97% futures are both up about 1%.
