Tesla (TSLA -12.34%) inventory fell 11% via 11:45 a.m. ET Wednesday after the corporate badly missed analyst forecasts for earnings Tuesday evening.

Heading into the second-quarter report, Wall Road forecast the electrical automobile chief would earn $0.62 per share on gross sales of $24.8 billion. Tesla exceeded the latter expectation, reporting Q2 gross sales of $25.5 billion. However this gross sales development got here at a price to revenue: Earnings have been solely $0.52 per share.

Tesla income collapse

Not all Tesla’s information was dangerous. Notably, the corporate’s vitality technology (i.e., photo voltaic panels) and storage (i.e., batteries) division — which imagine it or not is now extra worthwhile (with an 18.9% gross revenue margin) than the automotive enterprise, doubled in measurement to $1.5 billion in gross sales. And free money movement for the quarter elevated properly to $1.3 billion.

Automotive gross sales, nevertheless, fell 7% 12 months over 12 months. And complete gross sales have been up an anemic 2%, regardless of beating estimates.

Significantly worrisome is the truth that working bills surged 39% within the quarter. Falling gross sales and rising prices shouldn’t be often a recipe for sturdy income, and this proved true for Tesla, too. The corporate’s working revenue margin shrank by greater than a 3rd, to six.3%. Working income fell one-third to $1.6 billion. Internet income cratered — down 45%.

What it means for buyers

Even then, the dangerous information wasn’t accomplished. Seems, each analyst forecasts and Tesla’s $0.52 headline consequence have been put within the type of professional forma, non-GAAP income. When calculated in line with typically accepted accounting ideas, Tesla’s revenue per share was solely $0.42.

So what does this imply for buyers?

At $700 billion in market capitalization and with $12.4 billion in trailing earnings, Tesla inventory at the moment prices greater than 56 instances trailing earnings. That would not essentially be a nasty factor if Tesla was nonetheless rising its gross sales by 50% or 70% yearly, as occurred in the course of the pandemic. Nevertheless, with Tesla inventory caught practically in impartial at a 2% gross sales development price, and revenue margins plummeting, it is arduous to name Tesla inventory a purchase.