Is This Stock The Bloomberg Terminal for Earth Data?

Earth imaging outfit Planet Labs went public after completing its merger with the special-purpose acquisition company, dMY Technology Group, Inc. IV. The firm was founded in 2010 by William Marshall, Chris Boshuizen and Robbie Schingler, three former NASA employees who saw the viability and rising business potential that daily mapping of the Earth’s surface could offer.

And their vision appears to have been prophetic. The insights gleaned from Planet Labs’ workflows are now highly-prized by companies in both the finance and agriculture industries, all the way to civil government and defense contractors too.
With the proceeds from its SPAC merger netting Planet an additional $590 million in cash, just where is the company headed, and what are its prospects in an increasingly uncertain world?

The Bloomberg Terminal for Earth Data

Planet Labs describes itself as “the ‘Bloomberg Terminal’ for Earth Data”.
The company provides constantly updated satellite imagery of the Earth’s surface primarily through its Dove constellation, which can then be refined into higher-resolution images using the more sophisticated SkySat system.
The RapidEye constellation – which was retired in 2020 – also provides users with one of the world’s largest archives of 5-meter resolution images ever compiled.
As well as images, PL also provides analytic data enabling customers to make sense of the mass of information available to them. Clients then use these insights to gain knowledge for a wide range of purposes, including crop monitoring, insurance risk, carbon sequestration and economic activity.
The planetary variables that the firm’s satellites can measure are equally as diverse, with changes in biomass, roads & buildings, and water reserves just a few among many that customers can track.
Source: Unsplash

How Does Planet Labs Make Money?

Customers can access Planet’s data through its cloud-based platform, from where they’re able to precisely customize the exact kind of images and analytical information that they require.
PL ultimately monetizes this access by selling licenses to users based on the type, and quantity, of images required.
Images are typically priced on a per area basis, with higher resolutions normally costing more. Discounts are available for larger volume orders too.
This subscription model enables Planet to generate very high margins for every new client it enrolls, with the company estimating a 94-96% margin on all new business. This is because each image its satellites capture are uploaded to PL’s platform, after which they’re all equally available to any one of the company’s customers – meaning that the cost to serve new customers is extremely low.
This approach also ensures that the subscription model is highly scalable as the business continues to grow.

Is Planet Labs Free?

Although Planet Labs generally charges for access to its platform, it has already begun to make some of its data-sets available for free.
For instance, PL allows researchers studying the loss of tropical forests to use its images to combat climate change, while some German nonprofit and governmental institutions can also apply for access to its RapidEye, Planetscope and SkySat imagery.

Is Planet Labs A Good Company?

Planet Labs has plenty of competitive advantages that put it ahead of its rivals, as well as being suitably positioned to take advantage of some market-specific opportunities.
To begin with, PL already has superiority in space due to the length of time it’s been operating in the field. Indeed, analyst firm Needham – who initiated coverage of Planet back in January – believes that the business has a 5-year head-start on its rivals, with its unique daily scanning of the globe – and its archive of 1,700 images for every point on the planet – likely to be critical in the race to win customers.
Many clients want to back-test their models with historical data, and there’s no way they can do this at the present time without access to Planet’s archive.
Furthermore, Planet’s data subscription business isn’t just highly scalable, it also generates 90% of its revenues on a recurring basis too.
As mentioned earlier, not only is the cost of new customers low, but so is the spend needed to keep those customers profitable. Indeed, PL believes its net dollar retention rate for the financial year 2022 will be upwards of a very respectable 110%.
In addition, the total addressable market for Planet’s services is huge. The company currently derives most of its revenues from the agriculture, government, mapping and intelligence sectors. These operations are slated to grow in absolute terms, but the company also has promising opportunities to expand into other verticals too, including the forestry, insurance and energy space as well.

Who Are Planet Labs Competitors?

Two companies that could come to rival Planet Labs in the future are Maxar Technologies and Satellogic.
Maxar is the largest of the two firms, with a market cap of $2.8 billion compared to Satellogic’s $730 million. 

Maxar’s biggest client is the US government, from which it derives roughly 83% of its revenue. The company can only scan around 5 million square kilometers a day. For comparison, Planet scans the entire earth’s surface twice a day, putting Maxar at a significant disadvantage.
Satellogic, on the other hand, can scan even less, and currently only operates 17 commercial satellites. Its maximum resolution of 0.7 meters is also less than that of Planet Labs, which would make PL a more attractive proposition for potential clients.

Is Planet Labs Profitable?

Since the company started trading on the NYSE in December last year, Planet Labs’ share price has not performed well. The firm opened at a price of $9.86, but has since lost 47% of its value.
Why the company declined so rapidly probably has less to do with its fundamental business operations as it does with the current financial environment. High inflation tends to weigh more heavily on fast-growing companies like Planet, while the general rotation out of technology stocks which began in late 2021 hasn’t helped either.
However, despite its share price woes, Planet Labs still has a lot going for it. In its first earnings report as a public company, PL delivered record third quarter revenue of just under $32 million, which was an improvement of 16% on a year-on-year basis.
The firm’s end of period customer count was up 32%, while its percent of recurring annual contract value grew to 94%. Planet’s gross margin also spiked this quarter from 27% in 2021 to 34% this time round. 
Not surprisingly, Planet Labs didn’t record a profit this quarter, as the company was focused mainly on developing its key growth initiatives, including improving its software capabilities and expanding its sales force.
The company is looking to make its data easier to consume – with the creation of a robust app ecosystem and platform APIs central to that aim. The firm’s net loss of ($41.5) million reflects the company’s ambitious investments in R&D rather than any other underlying problem. 
With its growth plan now fully capitalized from the recent SPAC deal, Planet finally has the means to realize its vision for the future. If it stays the course, investors can expect profitability for PL very soon – and hopefully a reversal in its current price trend.

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