The second quarter will be wild for electric-vehicle leader
First, there were production problems because of Covid lockdowns in China. Now there is Bitcoin.
Recent price declines in
(ticker: TSLA) likely will have to recognize a significant loss from its Bitcoin holdings in its second-quarter earnings report. Bitcoin was plunging Wednesday, bringing it closer to psychologically important $20,000 level.
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.
The fair market value of Bitcoin held was about $2 billion. Companies don’t write up the value of Bitcoin on their balance sheet from quarter to quarter. They only recognize gains or losses on sales as well as losses when Bitcoin trades below the original purchase. It’s a quirk of Bitcoin accounting. It’s treated more like a piece of equipment and less like a currency.
Over time, Tesla has recognized about $128 million in gains and $101 million in losses associated with the original $1.5 billion purchase.
For the second quarter of 2022, Tesla likely will have a pretax loss of about $360 million, based on where Bitcoin is trading today. That’s about 35 cents a share.
Investors should see it as a one-time charge and Bitcoin probably won’t make or break second-quarter results. That is a guess though. How investors react to any one-time charge can’t really be known in advance.
Currently, Wall Street expects Tesla to earn about $2.10 a share in the second quarter, down from $3.22 earned in the first quarter of 2022.
The $2.10 number probably doesn’t include any Bitcoin impairment. Estimates are down because of production. Analysts project that Tesla will deliver 250,000 to 270,000 vehicles in the second quarter. That’s down from a record 310,048 vehicles delivered in the first quarter. Delivery estimates have fallen and are wide-ranging because Covid lockdowns in Shanghai constrained production for Tesla, as well as the entire Chinese car industry, in the second quarter.
Coming into Wednesday trading, Tesla stock has declined about 37% this year. The
have dropped 22% and 31%, respectively.
Write to Al Root at [email protected]