What happened

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 its first-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. 

Model S and Model X vehicles outside of Tesla's factory.

Image source: Author.

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

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.