(Cree earnings story updated for analyst commentary)NEW YORK ( TheStreet) -- LED sector bellwether Cree ( CREE) missed on both the top and bottom line in its after-market earnings on Tuesday, sending shares falling by more than 13% after the closing bell. Cree reported revenue of $256 million and earnings per share of 55 cents, below the Street consensus revenue figure or $276 million, and consensus call for 58 cents per share earnings. Cree missed its own revenue target of $270 million to $280 million, and it's not the first time in recent memory that Cree has failed to live up to its own expectations. Cree also referred to "the ongoing inventory correction" in Asia as a reason for its miss. Worse yet, Cree referred to its core market of LED component sales being weaker than expected. For the coming quarter, Cree is guiding to lower revenue of $245 million to $265 million and gross margin of 46%, below this quarter's 47% gross margin. The gross margin difference on flat revenue guidance could be explained by inventory that didn't move as expected in the most recent quarter needing to be moved at lower pricing. Bill Ong, analyst at Merriman Curhan Ford, said while Cree had disappointed in the last two quarters, coming in at the low-end of guidance in one quarter and then slightly missing the Street consensus, these results are the most disconcerting because it's a big miss of even the low-end of the company's guidance. "The real downtrend is taking place" the analyst said, and Cree will have to effectively answer the question of when that downturn ends. "Investors won't be patient with Cree shares if the demand that's not happening right now isn't going to occur any time soon," Ong said. "I don't think it's good for the LED stocks no matter how you slice it when the end market for all of these guys looks weaker than one of the main players would have expected," said Avian Securities analyst Andrew Abrams. "This is potentially much worse than what SemiLEDs said about pricing pressure in a niche market," the analyst added. With the recent rally in the LED stocks, investors were looking for any sign of weakness to trigger another round of selling in LED stocks, including CREE, Veeco Instruments ( VECO), and Aixtron ( AIXG). While Veeco and Aixtron are true competitors in the LED equipment market, all three of the stocks tend to trade as a basket based on the demand outlook in the LED sector. In the past few months, the demand outlook improved in the LED space and that meant big gains for all three LED stocks after what had been a big fall 2010 selloff. Over the past three months, Cree shares are up 15%, Veeco shares are up 25% and Aixtron shares are up 35%. In the past six weeks, Cree shares gained 30%.