Tesla May Take $460M Impairment Charge on Its Bitcoin Holdings for Q2, Analyst Says
The cryptocurrency's price fell significantly during the quarter.
Tesla, the electric car maker led by crypto proponent Elon Musk, may take a $460 million impairment charge on its sizable bitcoin holdings for the second quarter, according to a note from Barclays analyst Brian Johnson. The company is scheduled to report after the stock market closes on Wednesday.
- Johnson's calculation assumes Tesla hasn’t sold or added to its bitcoin (BTC) holdings in the quarter, something it hasn’t done since the first quarter of last year.
- Tesla first bought $1.5 billion worth of bitcoin in January 2021 when the cryptocurrency was selling for $32,000 to $33,000. Tesla sold about 10% of its holdings later in that first quarter, but hasn't bought or sold any of its bitcoin since then.
- With bitcoin ending the second quarter at $18,731, Johnson, who is bearish on Tesla, expects the company to take a noncash, impairment charge on its total holdings of about $460 million, or roughly 40 cents a share.
- According to accounting rules for digital assets, if the price of an asset falls during a quarter, a company must take an impairment charge. But if the price increases, it isn't reported as a gain unless the asset is sold.
- Overall, Johnson kept his underweight rating on Tesla, but raised his price target to $380 from $370 based on slightly higher earnings estimates overall.
- Analysts polled by FactSet expect Tesla to report adjusted earnings of $1.81 a share on $16.5 billion in sales for the second quarter.
- Tesla's stock was trading up 0.6% to $741.03 Wednesday. Shares are down almost 30% year to date.
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