Will Planet Labs Be the Next Big Tech Giant? Why This Stock Could Explode

Planet Labs (NYSE:PL) is a unique tech company that uses its fleet of satellites to image the entire planet every day.

Through this effort, Planet Labs has created a massive database of Earth images that can be used by its customers to draw insights about a host of industries, geographic changes and even military movements. Here’s why Planet Labs could be the next big tech growth story.

Planet Labs Has a Unique Advantage

At first glance, the ability to provide daily satellite image data doesn’t seem to be all that impressive a feat in an age where satellites are incredibly abundant. Where Planet Labs has a huge advantage, however, is the fact that it has been imaging the entire Earth daily since the mid-2010s.

Today, the company has more than 200 small satellites in orbit. Planet’s dataset combines an archive of proprietary data going back to 2009 with publicly available images stretching back as far as the 1970s.

Cumulatively, this gives Planet Labs by far the largest collection of geospatial data anywhere in the world, and that collection continues to grow each day at a rate no other competitor can match. As such, Planet Labs has emerged as the go-to solution for governments, businesses and research institutions requiring large datasets for analyzing everything from weather patterns to global shipping routes.

What Are the Possible Downsides?

Although Planet Labs has a unique moat that competitors would be extremely hard-pressed to overcome, the company does come with its own share of risks. Chief among these is the fact that Planet Labs is still far from profitability. Over the last two years, the company has consistently lost between about $30 million and $40 million per quarter.

Planet Labs also has a history of diluting its shares that may worry some investors. Though the largest creation of additional shares by far took place in 2022, the number of shares outstanding has continued to slowly creep upward since then.

Over the last several quarters, the number of shares has been increasing by mid-single-digit rates on a year-over-year basis.

Why PL Could Still Explode

Needless to say, Planet Labs still has a way to go to reach its full potential. Current signs, though, are relatively positive. In Q2, for example, the company posted record revenue of $61.1 million, representing a 14% leap over the year-ago period.

Revenues have been growing slowly but steadily since late 2021, a trend that could help push PL gradually higher over time.

Planet Labs has seen particularly strong demand from government defense agencies, noting a 30% year-over-year increase in defense and intelligence revenue in Q2. During the quarter, the company entered into contracts with NATO and an unnamed international defense customer.

The Kingdom of Bahrain also signed on as a customer, though this government’s use of Planet Labs’ data is currently geared more toward urban planning than defense applications.

The real upcoming opportunity for Planet Labs, however, may well come in the form of AI. For most of its history, Planet Labs provided enormous troves of data with relatively little in the way of analysis tools.

Thanks to recent improvements in generative AI, customers can increasingly gain fast and actionable insights from the company’s trove of Earth images. Demand along this line was noted in the Q2 report, and it’s likely that the use of AI will continue to add value to the company’s data in the coming years.

The continued growth of AI could also increase demand for Planet Labs’ data in and of itself. New models increasingly require large and complex training datasets, something that Planet can easily provide.

Looking forward, Planet Labs expects revenues of $61-64 million in Q3. The company has also set the goal of becoming profitable on an adjusted EBITDA basis by the end of this year, a milestone that would likely convince investors of its ability to eventually reach GAAP profitability. If the company meets or exceeds these expectations, it’s certainly possible that PL shares will rise on improved fundamentals and renewed investor enthusiasm.

Is PL Stock Cheap Now?

To date, PL shares have mostly delivered losses to investors. The stock peaked at nearly $12 in late 2021, but today it trades below $3 per share. Though early shareholders have certainly been burned by this massive drop in prices, this leaves the possibility that Planet Labs stock is cheap at today’s prices.

At 2.8x sales and 1.4x book value, PL shares enjoy modest pricing for a potentially high-growth tech company. With continued sales growth seemingly ahead, these ratios may very well narrow even further for investors who lock in a low cost basis.

It’s also worth noting that the company carries no long-term debt and maintains a cash and short-term investment reserve of about $249 million. As such, Planet Labs appears to be in a fairly strong financial position in spite of its losses.

Analysts also seem to believe that PL is cheap at today’s prices, as the average from seven standing price forecasts is $3.93. Compared to the most recent closing price, this would give PL shares an upside of well over 70%.

Additionally, six of the seven analysts covering the stock rate it as a Buy. Due to its status as a low-priced startup that still hasn’t reached profitability, investors should be cautious in assuming such large return rates.

This is especially true given the comparatively small group of analysts issuing ratings on the stock because more bearish views may not be fully represented among the current crop of forecasts.

What Is The Stock Price Forecast for Planet Labs in 2025?

By 2025, the consensus price forecast among analysts Is that Planet Labs stock will rise to $4.02 per share, representing a 77% upside opportunity.

There’s little doubt that Planet Labs has a lot going for it. With an entrenched position in its industry, ongoing revenue growth and a reasonably good financial position, the company is attractive as a long-term growth proposition. Shares are also fairly inexpensive at the moment, potentially creating an opportunity for investors to lock in a low cost.

Don’t be too complacent in overlooking the fact that PL is most likely a high-risk, high-reward proposition. The company is still far from profitability, and much of its value still rests on earnings potential that could be several years away.

The company has also shown a proclivity for issuing new shares, a trend that could gradually dilute ownership for existing shareholders over time. With that said, for risk-tolerant growth investors, Planet Labs may have enough potential in the long run and a low enough entry price to make these possible pitfalls worthwhile.

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