Tesla may have posted disappointing fourth-quarter results, but CEO Elon Musk is confident that the Silicon Valley car company will reach a market capitalization of $700 billion in 10 years. That would match Apple's current market cap, which rose to the $700 billion mark in the last quarter.
Although revenue during the last quarter was up at $956.7 million from the $615.2 million a year ago, Tesla posted a quarterly loss of $107.6 million or 86 cents per share, a huge plunge from the $16.3 million or 13 cents per share loss during the same period in 2013. On an adjusted basis, Tesla reported a loss of 13 cents per share, widely missing the 31 cents per share profit analysts expected for the last quarter.
But Musk continues to see favorable results for Tesla in the long run. Citing "back of the envelope" calculations, Musk announced that Tesla's market cap in the next decade "could be on the order of where Apple is." His estimate assumes that Tesla sees double-digit revenue growth of not less than 50 percent and a price-to-earnings ratio of 20.
Despite the Tesla chief's continued optimism, investors felt dismayed as Musk announced that the electric car maker will continue to spend more for expanding its charging infrastructure and building a massive gigafactory just outside Reno, Nevada, which Musk says is on schedule to start producing cheap batteries by 2016. Musk said for Tesla to achieve an Apple-like status by 2025, it requires significant capital expenditures.
"We're going to spend staggering amounts of money on (capital expenditures)... for a good reason, and with a good ROI (return on investment)," Musk said.
Tesla's expansion of its charging network and the development of the new Model X crossover, which is set to arrive to markets in six months, nearly doubled the company's operating expenses from $169.9 million in the same quarter during the previous year to $336.5 million in the last quarter of 2014. Tesla's operating expenditure for the entire year was $1.07 billion, and the company expects that to grow by another 50 percent for 2015.
Compounded with its increasing expenses are Tesla's production problems. In the last quarter, Tesla delivered a total of 9,834 Model S sedans to customers, well below Musk's forecast of 13,000 deliveries for the last quarter. Overall, Tesla delivered 31,655 vehicles for the entire year, falling short of the 35,000 units Musk said the company will sell last year.
The company attributes these production snags to "a combination of customers being on vacation, severe winter weather, and shipping problems." Musk says the company has rolled over the deliveries into the first quarter of this year. Moreover, he expects continuous sales growth for 2015, as the arrival of the Model X combined with the existing Model S will push sales to 55,000 this year.
Shares of the electric car company dipped 4 percent to $204.50 in after-hours trading following Wednesday's conference call. Its market cap closed at $26.7 billion, less than 4 percent of Apple's own market cap.