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Tesla earnings beat estimates, Gigafactory construction imminent

Tesla's earnings beat Wall Street estimates, yet shares fluctuate in after-hours trading. The company says it's still on track to deliver 35,000 Model S units by year's end.

Tesla's Model S sedan. CNET

Electric carmaker Tesla Motors released its second-quarter earnings results Thursday, beating estimates and revealing that delivery and production of its Model S sedan are on track.

Tesla reported adjusted earnings of $16 million, or 11 cents a share excluding one-time items like stock-based compensation, beating Wall Street expectations of 4 cents a share, according to analyst consensus collected by Thompson Reuters.

On an unadjusted basis, Tesla posted a loss of $62 million, or 50 cents a share, nearly double its losses from the second quarter of last year. Non-GAAP revenue for the quarter came in at $857.5 million, up 55 percent from last year and ahead of the $811 million estimate.

Tesla shares rose ahead of the report, opening at $229, yet closed down 5.62 percent. Shares began fluctuating in the red in after-hours trading, down as much as 3 percent at times, yet have rebounded and are now up 0.26 percent. The initial slide may be attributed to the market's disastrous drop Thursday as corporations like Exxon Mobil and Whole Foods Market reported unfavorable earnings and the index average began universally falling to six-month lows. The drop was caused, analysts say, by a confluence of factors: a strong sell-off driven by a reassessment of the outlook for US interest rates, as well as the worry over Europe's economy and the after-effects of an Argentine default.

Still, investors investors have long responded to Tesla earnings with a less-than-pleased outlook regarding the company's short-term profitability, which is hampered by its significant investments in future growth opportunities necessary to scale production and begin rolling out new vehicles. Those cars include the crossover Model X SUV, slated for next year, and its $35,000 Model 3 expected to arrive in 2017. The company announced that it will spend nearly $1 billion in 2014 and has $2.7 billion in cash reserves.

One such investment is Tesla's so-called Gigafactory, a next-generation plant for pumping out lithium-ion batteries. Tesla revealed in its investor report that it broke ground in June at a site in Reno, Nev., as a prospective candidate. Nevada is one of many sites, alongside Arizona, California, New Mexico and Texas, that Tesla is currently scouting for construction in collaboration with Panasonic, its first public partner in the estimated $5 billion project.

CEO Elon Musk expects Tesla to announce more Gigafactory partners and confirm a location in the next few months. The factory, which Musk expects to open in 2017 and outpace in one year the world's 2013 lithium-ion production, will be integral to Tesla's plans to produce the Model 3 and to achieve production output of 500,000 vehicles per year by 2020.

Tesla revealed in its investor report that it produced 8,763 Model S units -- the average price of which Tesla said was $101,000 -- and delivered 7,579 of them in the second quarter. That marks a 16 percent improvement over its first-quarter production and exceeds Tesla's own estimate of 7,500 deliveries, but falls far behind optimistic outlooks projecting up to as many as 9,500 vehicles.

Tesla still expects to produce 35,000 Model S's by year's end. The company is attributing its current sluggish production speeds to its factory limitations. Tesla closed its Fremont, Calif., facility earlier this month to gear up for production of its Model X, which will begin next week.

"We are adding new production capacity at our Fremont factory that will allow us to meet the growing worldwide demand for our vehicles," Musk wrote in Tesla's investor report. "The speed at which we are executing this capacity upgrade will allow us to exceed 35,000 Model S deliveries this year. Provided that we execute well and there are no serious macroeconomic shocks, Tesla's annualized delivery rate should exceed 100,000 units by the end of next year."

Update at 3:37 p.m. PT: Added information regarding Tesla's second-quarter losses compared with last year and average price of Model S.

Update at 4:00 p.m. PT: Added context regarding the US stock market drop on Thursday.