Tesla May Take $460M Impairment Charge on Its Bitcoin Holdings for Q2, Analyst Says

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$86,817.46 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.