Investors plug back in after Tesla earnings surprise

Source: Tesla Motors

Tesla Motors Model S

Plucky plug-based automaker Tesla Motors delivered another surprise with its second-quarter earnings announcements as it eked out a modest profit rather than the loss analysts had forecast.

(Read more: Tesla posts surprise profit; shares jump 15%)

After a sharp selloff during the day that saw Tesla shares plunge by 5.5 percent before the closing bell on Wall Street, investors rapidly reversed course, almost immediately sparking a 14 percent gain in after-hours trading.

The strong showing could leave egg on the faces of skeptical analysts, some of whom had issued sharply negative reports following Tesla's first-ever profit in the January to March quarter.

For the last quarter, net income jumped 70 percent on a non-GAAP basis, to $26 million. That translates to earnings per share of 20 cents, excluding one-time charges. The consensus forecast had been for a loss of 19 cents.

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Despite the better-than-expected earnings, Tesla CEO Elon Musk cautions that the California-based start-up has a number of challenges to focus on and that earnings are not at the top of the list. That said, boosting production of the maker's Model S clearly helped the bottom line, overcoming a significant reduction in zero-emissions vehicle credits that had been expected to punch the company into the red.

Tesla was able to boost second-quarter production an impressive 25 percent over the previous three months, to 500 vehicles a week. The original company forecast was for 4,500 deliveries, but it appears to have reached 5,150.

That helped the maker boost its gross margin (again, on a non-GAAP basis) to 22 percent, with a fourth-quarter target of 25 percent. Revenues for the second quarter reached $551 million, nearly 40 percent more than the consensus forecast of $395 million.

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Meanwhile, the maker entered the third quarter with nearly $750 million in cash and—perhaps more significant—without a penny in government debt. It received a wildly popular response to its recent stock offering, which helped it pay off a federal loan meant to spur high-tech automotive development. The money raised will now help Tesla fund development of the Model X crossover (expected to market late next year), as well as a lower-cost, more mainstream model that Musk has been promising.

An Internet pioneer who also serves as CEO of the rocket-launch company SpaceX and as chairman of SolarCity, Musk has repeatedly defied conventional wisdom—and the fact that few other manufacturers have gained traction in the nascent battery-car market.

He has ordered a number of steps aimed at improving the appeal of a technology hobbled by high costs, limited range, long charging times and uncertainty about battery life.

Those steps include what Musk described as a "bullet-proof warranty program" when it was announced earlier this year. Tesla is also in the midst of setting up a nationwide network of high-speed "supercharger" stations and has demonstrated plans to permit rapid battery swaps.

(Read more: Elon Musk: Self-driving cars, hyperloops and a cheaper Tesla)

The company dropped the price of the lowest-cost version of the Tesla Model S earlier this year as the vast majority of buyers selected more expensive but longer-range versions—which has also helped buoy margins and net income.

Tesla's results—and, some suggest, Musk's infectious enthusiasm—have clearly worked with investors.The stock has been running as high as $145.73 in recent days, up from a 52-week low of $26.86. Though it sputtered earlier in the week when media reports suggested the maker would fall into the red for for the second quarter, investors have generally shrugged off negative forecasts.

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Those included one report from Goldman Sachs last month that set an upper-end value closer to $83 a share. Meanwhile, Donn Vickrey of Gradient Analytics warned that Tesla earnings deserved an "F," warning that "the company's results have been driven by nonrecurring boosts and accounting gimmicks, all of which are either unsustainable or purely cosmetic."

(Read more: Tesla shares slammed on Goldman's low price target)

Considering the continued uncertainty about the battery-car market and the growth Tesla probably will continue to need to support the more upbeat grade investors are giving, it's still far from certain if the maker can continue to build momentum.

—By CNBC Contributor Paul A. Eisenstein. Follow him on Twitter @DetroitBureau or at thedetroitbureau.com.