Tesla Motors Inc (NASDAQ:TSLA) posted impressive second quarter 2013 non GAAP revenue and EPS fueled by Model S deliveries. For the second quarter, revenue and adjusted EPS came in at $405.1 million and $0.22, respectively, compared to Wedbush analyst estimates of $385.3 million and ($0.21).

Tesla Motors TSLA

According to the Wedbush report by analysts Craig Irwin and Min Xu, adjusted earnings per share does not include $16.4 million in costs for the early repayment of the DOE ATVM facility.

Tesla Motors Inc (NASDAQ:TSLA) production rate increased

Analysts expect that the company manufactured more than 5400 Model S vehicles and delivered 5150 units in the second quarter compared to 5,000 vehicles produced in the first quarter and 4,900 delivered. Guidance provided by Tesla Motors Inc (NASDAQ:TSLA) was 4,500 vehicles in the second quarter compared to analysts’ estimate of 4,700 models.  “The production upside” according to analysts was due to the increase in production rates from 400 per week to 500 per week.

Tesla Motors Inc (NASDAQ:TSLA) increased gross margin

Tesla posted a gross margin of 24.8 percent compared to estimates of 18.0 percent and an average consensus of 18.8 percent, with an increase over the first quarter margin of 17.1 percent.

The analysts also noted that vehicle gross margin surged significantly above first quarter 2013 levels. Vehicle margins for Tesla Motors Inc (NASDAQ:TSLA) in the second quarter came in at 13 percent, which is an increase from 5 percent in the first quarter 2013, due to enhanced efficiencies in the factory and better prices from suppliers. Wedbush is expecting that vehicle margin of 25 percent is achievable in the fourth quarter.

Tesla Motors Inc (NASDAQ:TSLA) to continue with ‘market penetration and vehicle diversification’

Analysts find that valuation based on 2017 estimates is perfect because it will be the first year that Gen-III vehicles are expected to increase. Additionally, analysts also feel that EPS at 25.0 xs is appropriate as EV manufacturer will be in growth mode, which will further let the company to continue market penetration and vehicle diversification to earn higher earnings.

Tesla Motors Inc (NASDAQ:TSLA) can continue to achieve growth in the long term backed by lower battery cost and Gen-III vehicle target costs, which will counterbalance uncertainty in immediate and longer term sales volume.

Tesla Motors Inc (NASDAQ:TSLA): Positives and concerns

For the quarter, analysts noted positives like gross margin enhancement of the vehicle to 13 percent, improved production rate of Model S from 400 per week in the first quarter to 500 per week in the second quarter and 5,150 vehicles delivered.

However, they raised concerns over operating cash burn of $38.2 million despite strong sales, and that Tesla Motors Inc (NASDAQ:TSLA) management did not increase its 2013 guidance of 21,000 units despite production upside.

Wedbush analysts have raised their price target from $110 to $150 and are maintaining a Neutral rating on the stock.