UBS, Deutsche Bank Express Caution Following Tesla's Second Quarter Results

Tesla Motors TSLA on Thursday reported mostly positive second quarter results.

The electric vehicle manufacturer earned $0.11, topping analyst expectations by $0.07. Revenue of $858 million also topped analyst expectations by more than $47 million.

In the quarter, Tesla delivered 7,579 vehicles and guided to deliver 7,800 vehicles in the third quarter as the company will be forced to idle its Fremont factory for two-weeks. Tesla's management expects its third quarter will only be “marginally profitable.”

By the end of next year, Tesla expects its annualized delivery rate to top 100,000 cars.

Gross margin of 26.8 percent improved 140 basis points, on track to reach a 28 percent projection by the end of the fourth quarter.

Finally, Tesla confirmed that it broke ground on a site just outside of Reno, Nevada, that could potentially be the future site of its Gigafactory.

UBS: Confident On Future Investments, Rough Quarter Ahead

In a note to clients on Friday, Colin Langan of UBS reiterated a Neutral rating with a price target raise from $200 to $230.

Langan notes that Tesla Motors delivered a solid second quarter result with deliveries exceeding his guidance. Additionally, Tesla's earnings per share, revenue and gross margin all topped his expectations.

Despite the positive quarter, Tesla's third quarter guidance is weak, according to the analyst. Langan notes that the production facility down time will negatively impact production and deliveries. Langan had previously expected Tesla to deliver 10,000 units in the third quarter.

“Given the second quarter beat and weak third quarter guide, we expect the stock to trade down,” the analyst wrote.

Deutsche Bank: Steeper Trajectory Of Volume & Cost

In a note to clients on Friday, Rod Lache of Deutsche Bank reiterated a Hold rating on Tesla with a $220 price target.

Lache notes that Tesla will continue to face an environment where demand continues to outpace rising supply, especially as the company launches the Model X SUV. As such, the growth trajectory from 2015 to 2017 appears to be steeper than previously imagined.

“Management indicated that they expect to exit 2014 at a 50,000 unit annualized run rate, and they expect to exit 2015 at a 100,000 unit annualized run rate,” the analyst wrote. “These targets imply that our volume forecasts for 2015, 2016, and 2017 (51,000, 60,000, and 83,000) are likely low.”

Lache estimates that every 10,000 unit variance from its estimates could potentially add $300 million to gross profit, but this could be partially offset by Tesla's operating expenses which also continue to trend higher.

Lache also notes that Tesla's claims of bringing down its battery pack costs to below $100/kWh in less than 10 years could have “broad implications” for not only Tesla but the entire auto industry. The analyst believes that if this claim proves to be true, Tesla would have an outright cost advantage for its electric vehicles compared to internal combustion alternatives, which typically costs more than $5,000 per vehicle and could potentially double over the next 10 years.

According to Lache's calculations, Tesla's upcoming third generation Model 3 vehicle is expected to have a 48 kWh battery pack, which at $100/kWh would cost roughly $4,800 to manufacturer.

Despite a solid second quarter result, Tesla's near and mid-term futures presents a set of challenges.

Shares of Tesla traded recently at $236.24, up 5.8 percent.