Why Did PL Go Up?

The commercial applications of Planet’s imaging are virtually unlimited, especially when examined in a time-lapse sequence.

Planet already has clients in agriculture, mapping, forestry, government, and media, among others. The images contribute to the expansion of sustainability initiatives and are being used in planning for the future of urban and rural communities.

The concept is intriguing, and no one doubts the value of Planet’s technology. However, to date, that hasn’t translated into returns for investors. In fact, PL stock went down rather sharply after it started trading on the New York Stock Exchange in the fourth quarter of 2021.

Now that Planet stock shows signs of recovery, investors are more inclined to buy – but they need more information. Specifically, why did PL go up, and will it continue on that growth trajectory?

Why Did Planet Stock Go Down?

Planet Labs began trading publicly on December 8, 2021. The company didn’t take the traditional IPO route. Instead, it merged with the special purpose acquisition company (SPAC) dMY Technology Group IV and became a Public Benefit Corporation (PBC).

While Planet still intends to make a profit and deliver returns for shareholders, that’s not the company’s only function.

As a PBC, Planet is obligated to consider the needs of all stakeholders when making decisions. That includes employees, members of the community, and the environment. Planet’s PBC purpose is “to accelerate humanity toward a more sustainable, secure, and prosperous world by illuminating environmental and social change.”

Though PL stock did go up five percent on its first day as a publicly traded company, it was down more than 50 percent by the start of 2022. Among other issues, rising inflation and increased interest rates soured investors on high-risk startups, and many abandoned new tech companies for safer alternatives.

When Planet Labs announced its fiscal first-quarter 2023 results in mid-June, the stock price declined even further. Though the company beat sales estimates with total sales of $40.1 million instead of the projected $39.5 million, it missed its earnings target. Planet expected to lose $0.15 per share for the quarter, but actual results came in at a loss of $0.17 per share.

Investors’ reactions notwithstanding, there was more good news than bad news. Sales increased by 26 percent year-over-year, which was an improvement over the 23 percent growth reported for the fiscal fourth quarter of 2022. The growth was even more impressive when compared to fiscal 2022 year-end results. Planet’s sales grew just 16 percent for that entire 12-month period.

Planet’s leaders projected sales growth of 38 percent year-over-year for the fiscal second quarter of 2023, but investors weren’t convinced that the company would deliver. Share prices crept up gradually in the weeks following the fiscal first quarter financial report, but they never reflected the full value of fiscal second-quarter guidance.

Why Did PL Go Up?

Investors who kept the faith despite Planet’s disappointing fiscal first-quarter earnings were rewarded when the company announced its fiscal second-quarter results on September 12, 2022. Planet didn’t just meet expectations – it exceeded them by a wide margin.

Planet reported $48.5 million in revenue – an increase of 59 percent year-over-year. GAAP gross margin went from 35 percent for the prior year period to a whopping 48 percent. Non-GAAP gross margin increased from 36 percent to 52 percent year-over-year.

Other key metrics include:

• Recurring Annual Contract Value (ACV) – 93 percent

• End of Period (EoP) Customer Count – 855 (17 percent increase year-over-year)

• Net Dollar Retention Rate – 125 percent

• Total Cash, Cash Equivalents, and Short-Term Investments – $458 million

These successes prompted business leaders to increase the full-year guidance to 42 percent year-over-year growth, and share prices went up by more than 20 percent in the week that followed. Does that mean PL stock is a buy?

Is Planet Stock A Buy?

All signs point to continued success for Planet Labs. The company is performing critical work in supporting Ukraine during the Russian invasion, and NASA has taken Planet on as a partner for data and connectivity projects.

Meanwhile, its list of commercial and government clients is growing as more entities realize the advantages of imaging data. Though Planet isn’t profitable yet, most industry experts believe it is just a matter of time.

Analysts have given 12-month targets that range from $8 per share to $12 per share. The median is $9.50, which would be an increase of more than 45 percent. Regardless of the target, they all agree that Planet Labs stock is a buy.

When we crunched the numbers, we arrived at a fair market value of $11.05 per share based on a 10-year discounted cash flow forecast (revenue exit). That would suggest the company has 70% upside from current levels at the time of research. 

In the coming weeks, management will be presenting at a number of high profile conferences and any good news could re-ignite the share price. But it’s also clear from block trades crossing the wires so to speak that some well-capitalized sharks are swimming in these waters, keeping a lid on share price and causing wild share price moves that would distress all but the most high conviction investors. 

The takeaway? The future is bright for this space data play but expect choppy price action for the foreseeable future.

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