Tesla and Bitcoin: performance in Q2 2022

Yesterday, Tesla’s second quarterly earnings report came out, which was above expectations and left analysts stunned, but that was not the only interesting news. The company has sold 75% of the Bitcoin in its possession.

Profitability of Tesla in the second quarter

Last night, like clockwork, the quarterly report of the company led by Elon Musk came out. 

The news was important news for everyone. It certainly was for the company, but it was also for the S&P 500, Nasdaq, investors and of course the American people. 

The company is among the largest by capitalization within these indices, so its data is always viewed with particular apprehension. 

The data surprised everyone as the quarter turned out contrary to expectations, and a few important things stand out. 

Revenues rose 42% to $16.9 billion, and this is complicit with the increase in vehicle sales prices made by the company to recover on inflation. 

The rise in the cost of raw materials and the difficulty in sourcing them brought a 13% growth in operating expenses that appear not to have affected operating income at all, which increased to $2.5 billion (+88%).

Despite the prolonged closure of the Shanghai Gigafactory, 25% more Model Y and 20% more Model X were produced. 

The Berlin Gigafactory also did very well, entering full operation for the first time while also making up for six declines in Shanghai production and the announcement of the start of industrial production of the much-heralded Cybertruck. 

Liquidity also increased more than twofold from $6.8 billion to $14.5 billion, improving profitability and reducing debt obligations.

This increase is due to the part that has raised most discussion: the sale of 75% of the Bitcoin in Tesla’s treasury for $936 million, money that greatly increased the company’s liquidity. 

The liquidation of Bitcoin from its assets

The news caused a stir mainly because the company has always been positively associated with the crypto world and this signal is seen by some as an abandonment of the industry, but the reality is different. 

Tesla still holds more than $200 million in BTC and probably the transaction was only necessary for operating expenses or major investments for its further development. 

Of a slightly different opinion are some insiders, such as Laura Hoy, an analyst for Hargreaves Lansdown, who states:

“Tesla’s second quarter results have received a lukewarm reception from investors despite rising operating margins in an increasingly challenging environment. However, the focus was on a decline in Automotive gross margins, which fell from 32.9% in the first quarter to 27.9%. The more cars slamming through Tesla’s huge giant factories, the lower the unit costs, so disappointing delivery numbers released earlier this month mean investors have already prepared for a drop in profitability. On the bright side, this should be a short-term problem. As we saw in the first quarter, fully functioning factories send dollars directly to the bottom line. Once the supply chain bottlenecks have eased and factories continue to operate at full capacity, margins will increase. Elon Musk’s affinity for cryptocurrency has also dented profits, with the group denouncing Bitcoin’s disabilities as a thorn in their side. It’s unclear exactly how much the group lost to the cryptocurrency sell-off, but with 75% of its stake now converted to a more stable currency, most of the damage has been recognized. However, bitcoin’s leaks underscore an important part of Tesla’s investment case: its quirky owner. While Musk’s impressive innovation has served the company well, his personal talents are starting to raise governance issues”.

The stock in the premarket was very volatile and this morning is registering a timid +1.13% at $735 a share.