Why Tesla, Inc. Is Down Today

By Daniel Sparks Markets Fool.com

What happened

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Shares of electric-car and sustainable energy company Tesla (NASDAQ: TSLA) fell as much as 6.5% on Thursday following the company's first-quarter earnings report Wednesday afternoon. The stock is down 5.7% at the time of this writing.

So what

Though itsfirst-quarter earnings report included record revenue, the company missed the mark when it came to earnings. Tesla posted an adjusted loss per share of $1.33 for its first quarter. While the loss per share was narrower than its adjusted loss of $1.46 per share in the year-ago quarter, it was a more significant loss than analysts anticipated. On average, analysts expected an adjusted loss per share of $0.83.

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Tesla's disappointing adjusted loss was primarily attributable to higher research and development and selling, general, and administrative expenses.

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In light of the stock's 55% rise in the past six months (including the impact of today's sell-off), any bad news was likely enough to help justify a sell-off, particularly when pairing the recent rise with an extraordinary valuation. Tesla trades at about six times sales, far higher than the average price-to-sales ratio of its automotive peers of 0.5.

Now what

Tesla's profitability isn't likely to improve meaningfully in the near future. With its lower-priced, higher-volume Model 3 beginning production in July, the company will likely continue to prioritize sales growth and market share over profitability.

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Daniel Sparks owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.