Over the last few months, the Russian invasion of Ukraine has demonstrated the invaluable role that private satellite imaging can play in war zones and areas of heightened military tension.
Indeed, thanks to companies like Planet Labs, it’s now possible for anyone with an internet connection to get up-to-date, high-resolution images of anywhere on the planet. This has made a decisive difference in operations in the region, where Ukrainian government forces have been able to locate and track enemy targets with much greater accuracy than ever before.
In fact, in a theater of conflict such as this – where ground targets are often located close to civilian areas – satellite imagery can be a vital tool in avoiding collateral damage.
Moreover, having the ability to generate and publish real-time pictures of the battlefield also helps counter enemy propaganda, which relies on the so-called “fog of war” to obfuscate the truth and disseminate misinformation.
As the owner of one of the most important constellations on the market, Planet Labs isn’t just playing a role in supporting armed combat in Ukraine either. The firm is also assisting NASA’s food security and agriculture program in assessing the health of the country’s grain supplies, showing that greater areas of cropland have been planted and harvested than initially thought.
With the benefits of satellite imaging having been so publicly vindicated, investors are beginning to take a renewed interest in Planet Labs’ potential as a lucrative stock pick. But is the organization just a niche venture with little prospects – or a tech company giant at the start of something special?
Source: Unsplash
Planet Labs: A Brief History
Planet Labs PBC is an American Earth imaging company based in San Francisco, California. It operates a constellation of more than 150 Dove satellites – or CubeSats – in low Earth orbit. The firm’s mission is to image the entire Earth daily, making global change visible, accessible and actionable.
Founded in 2010 by three former NASA scientists, Planet Labs captures 3 million images every day, laying claim to the world’s second-largest fleet of imaging satellites after Elon Musk’s SpaceX StarLink. These images are analyzed using an artificial intelligence-powered one-to-many data platform and are used by customers in agriculture, energy, civil government and environmental analysis.
The company’s Dove satellites are about the size of a shoebox and weigh just 4 kilograms. They’re designed for quick manufacturing and frequent cadence launches, with each satellite costing less than $1 million to build and launch.
Planet Labs’ technology is based on a “cloud-native” platform that is scalable and easily adaptable to new applications, and the company has been able to quickly increase its imaging capacity by adding more satellites to its constellation.
Planet Labs Is Thriving, Not Its Share Price
The second quarter of fiscal 2023 proved to be a record-breaking period for Planet Labs’ business.
The company reported a 59% increase in year-on-year sales – resulting in an unprecedented Q2 revenue of $48.5 million – while its non-GAAP gross margin also expanded from 36% to 52%.
Meanwhile, the firm’s net dollar retention rate grew annually from 125% to 127%, suggesting that PL is adept at not just giving its client base what it wants, but can keep its customers happy, engaged, and willing to spend more with every successive year.
But despite this, Planet’s stock value plummeted in 2022. The business declined 19.5% year-to-date, which seems bizarre given its strong financial showing of late.
However, compared to the broader market, it appears that PL is actually holding up pretty well. For instance, the NASDAQ Composite Index is down 29.3% over the same period of time, while internationally, the iShares JPX-Nikkei 400 ETF – which tracks the benchmark JPX-Nikkei Index 400 – is down 24.8%.
Is Planet Labs A Viable Long-term Stock Pick?
One of the issues that investors fear right now is Planet Labs’ lack of profitability. Indeed, the firm increased its revenue projection for fiscal 2023 to between $182 million and $190 million, and yet it still expects to make an adjusted EBITDA loss on that of, at best, $60 million.
But PL remains an attractive buy even if its bottom line needs to improve fairly quickly.
To begin with, the company has a business model that could see it become the “Bloomberg Terminal” of Earth data. Its total addressable market spans multiple industry verticals and offers an almost limitless number of customers.
Furthermore, in addition to the vast scale of its potential market opportunity, PL also enjoys a robust business moat as well. In fact, there are several reasons why it’s so expensive and difficult for new companies to break into the satellite industry, limiting the likelihood of a proliferation of competitors into the imaging space.
First, the technology required to build and operate a high-quality imaging satellite is extremely sophisticated and expensive. Moreover, the data archive of an established imaging company is a valuable asset that new entrants would need to acquire or recreate.
Lastly, incumbent companies have a significant competitive advantage in terms of economies of scale and experience, making it hard for new businesses to compete effectively. Taken together, these factors create a high barrier to entry for new firms trying to enter the satellite imaging market.
Crucially, PL’s balance sheet of $458 million in cash and short-term investments should make it easy for the company to fund its expansion efforts over the next couple of years.
Indeed, Planet Labs has asserted in the past that it sits at the intersection of a $153 trillion global economic shift in digital and sustainable transformation – which, if true, could pave the way for the venture to become profitable much sooner than initially thought.
#1 Stock For The Next 7 Days
When Financhill publishes its #1 stock, listen up. After all, the #1 stock is the cream of the crop, even when markets crash.
Financhill just revealed its top stock for investors right now... so there's no better time to claim your slice of the pie.
See The #1 Stock Now >>The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.