Tesla stock surges as Tesla Motors beats the odds

Tesla stock (TSLA) soared 17 percent to record highs after a surprisingly good earnings report. Tesla Motors continues to defy expectations, making Tesla stock an intriguing option for many clean tech investors.

Chalk another one up for Tesla Motors.

The luxury electric carmaker released a surprisingly good earnings report late Wednesday, defying pessimistic forecasts and sending Tesla Motors stock (TSLA) soaring.

In many ways, the odds are stacked against Tesla, and some still expect it to one day go the way of Fisker Karma, Better Place, and other high-profile flops in the electric vehicle (EV) industry. But the small car company in Fremont, Calif., continues to beat those odds, making a splash in an industry that is historically adverse to new entrants.

"Tesla has clearly found an unmet market niche that's capable of supporting the company, at least in the near term," Karl Brauer, senior analyst at Kelley Blue Book, said in an e-mailed statement. "The automaker's long-term goal of producing a high-volume, low-cost electric car is the next big hurdle, but for now they seem to be firing on all non-existent cylinders.”

After posting its first profit in Q1 2013, many analysts expected Tesla to slip back in the red for the second quarter. But at $26 million, Tesla more than doubled its operating profit in Q2, and ended the quarter with $747 million in cash and no government debt. It's stock ballooned in after hours trading Wednesday and by midday Thursday, was up more than 17 percent at $151.75. Still, because of its early repayment of its government and its car-price guarantee, which forces the company to start accounting for car sales as leases, Tesla officially posted a net loss in Q2 of $30.5 million, or 26 cents a share. 

"Our financial position and balance sheet have never been stronger," Tesla chief executive Elon Musk wrote in a letter to shareholders.

The company has a buzzworthy product to thank for that. Tesla's Model S is a current darling of the industry, earning rave reviews and big-name accolades. Sales of the $70,000 electric sedan jumped to a record 5,150 in Q2, surpassing the 4,500 sales the company expected to sell. 

Federal subsidies have also played a role in Tesla's success. The company received nearly half a billion dollars from the Department of Energy in June 2009 to spur growth in an automotive industry on the verge of collapse. This May, Tesla paid that loan back nine years ahead of schedule.

Tesla benefits from state initiatives as well. The company earns California zero-emission credits for production of the Model S and sells them to other automakers looking to meet California's emissions mandate. Those sales have buoyed Tesla's profits – earning the company $68 million in the first quarter and $51 million in Q2.

Whether that's a sign of shrewd business or a risky bet on government handouts is a matter of perspective. And only time will tell how long Tesla's run will last. Last month, BMW unveiled its electric i3. At $41,350, another entrant in the growing EV market.

The growing competition might partially explain Tesla's move to diversify its portfolio. The company is working on a Model X electric SUV scheduled for mass production in 2015. Musk has also hinted at plans to build a more affordable Tesla car priced somewhere around $35,000. 

"Tesla has found success competing against luxury heavyweights such as the 5-Series and E-Class," Alec Gutierrez, senior analyst at Kelley Blue Book, said in an e-mailed statement, "but their true test will come when they attempt to compete in the more mainstream categories that have proven to be a challenge to Chevrolet, Nissan, Ford, and others.”