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Tesla's decision to buy Bitcoin could lead to $460 million hit to Q2 earnings – Barclays

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(Kitco News) The decision to hold Bitcoin could hurt Tesla's upcoming second-quarter earnings, said Barclays.

In light of Bitcoin's drop to $19,000 at the end of the second quarter, Tesla could end up reporting an impairment of roughly $460 million, according to analyst Brian Johnson.

"With Bitcoin ending the quarter at ~$19k (well below TSLA's likely purchase price range of ~$32-33k), we expect TSLA to take an impairment charge in the quarter of ~$460mn or ~$0.40 per share," CNBC quoted Johnson as saying in a note to clients.

Tesla is scheduled to report its earnings this Wednesday after the bell.

At the beginning of 2021, an SEC filing revealed that Tesla bought $1.5 billion in Bitcoin. At the time, Bitcoin was worth around $30,000.

Since then, Bitcoin has seen massive ups and downs, rising to its all-time high of $69,000 in November 2021 and ending the second quarter of 2022 near $19,000, which was around 70% off its record highs. At the time of writing, Bitcoin was trading at $21,549.

For Tesla, this means a loss of about $11,270 per coin, which is around $460 million in total based on the calculation that it purchased 42,000 tokens.

Bitcoin suffered this year as investors exited their risk-on positions, and contagion risks impacted all cryptocurrencies. However, some analysts are getting slightly more optimistic about the future of Bitcoin, as the world's largest cryptocurrency breached $22,000 earlier on Monday.

"The result of [the inflation data] is another blow to economic and social well-being, as the Federal Reserve are forced to be more aggressive. However, Bitcoin has risen by over 10% since the news, and Ethereum has climbed by almost 40%. When the market starts reacting positively to negative news, this is a signal that a local bottom could be in for now, as fear may have caused the news to be priced in," GlobalBlock analyst Marcus Sotiriou wrote in a note Monday.

At the time of writing, Tesla stock was trading down nearly 40% year-to-date. Johnson added that he expects Tesla earnings to beat expectations on Wednesday.

"We expect a modest 2Q EPS beat vs consensus but see greater focus on FCF given CEO Elon Musk's comments last month that Berlin and Austin are' gigantic money furnaces right now,'" Johnson added.

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