Is Last Friday’s 10.99% Gain Just The Start?

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A few weeks ago we wrote an article titled Is This Space Stock Set To Blast Off, which featured Planet Labs. Fast forward to last Thursday’s earnings report, and Friday’s trading action, which resulted in a 10.99% one-day gain and it seems fair to say Planet may be on the cusp of escaping gravity soon. Let’s uncover why.

Planet was founded by three NASA scientists, and operates the largest Earth observation fleet of imaging satellites that provide critical data to diverse industries, from agriculture to defense.

As of Q1 FY2025, Planet Labs reported record quarterly revenue of $60.4 million, reflecting a 15% year-over-year increase but why did that spark such a huge share price rally?

Key Points

  • Planet Labs reported record quarterly revenue of $60.4 million, a 15% year-over-year increase, and a 14% increase in customers. Improved net loss and adjusted EBITDA indicate a path to profitability, with 95% of revenue from recurring annual contracts.
  • New contracts with the UK EO Data Hub and Kenya Space Agency, plus the upcoming launch of the Tanager-1 hyperspectral satellite, are set to enhance Planet’s imaging capabilities and support carbon emission analysis.
  • Despite positive growth, Planet Labs faces risks from revenue concentration on government contracts and competition from companies like Maxar Technologies and Airbus Defense and Space. 

Profitability On the Horizon

There was lots to like in Planet’s Q1 FY2025 results, including record $60.4 million in quarterly revenue, up 15% from the previous year and a 14% year-over-year increase in customers to 1,031.

95% of the revenue comes from recurring annual contracts, which means customer retention is generally high and revenue is largely predictable, both attractive qualities to shareholders.

And on the bottom line, the net loss was $29.3 million, an improvement from the $34.4 million loss in Q1 FY2024. Adjusted EBITDA loss also improved significantly to $8.4 million from $19.1 million and management forecasts profitability by FY Q4.

If there were a downside, it was the gross margin that came in at 52%, a slight decrease from the previous year. Overall, though, there was lots to like and the good news kept flowing.

International Growth & Key Hyperspectral Satellite

Shareholders were positively enthusiastic about strong demand for Planet’s data in the defense sector, including renewed contracts with the National Reconnaissance Office (NRO) and the U.S. Department of Defense.

The company has also grown internationally via two secured contracts with the UK EO Data Hub and the Kenya Space Agency.

But perhaps the most interesting opportunity comes from the launch of the Planet Insights Platform, which enhances customer and partner access to its data, as well as the upcoming launch of Tanager-1, Planet’s first hyperspectral satellite, will further expand its imaging capabilities.

The reason hyperspectral is so important is that it provides Planet with the opportunity to support carbon emission analysis which is likely to be a big business for credit monitoring.

More Positives

On the financial side, Planet Labs ended the quarter with $276 million in cash, cash equivalents, and short-term investments and remained debt-free, so it has the financial flexibility to grow. And those opportunities are numerous, including in the following sectors.

  • Agriculture: Insights for precision farming, crop monitoring, and yield optimization.
  • Forestry: Monitoring deforestation, forest health, and environmental changes.
  • Defense and Intelligence: Supporting national security with real-time geospatial intelligence.
  • Disaster Response: Offering critical data for natural disaster monitoring and response efforts.

Still Be Wary

Although there is lots to like about Planet and clearly investors were enthused, keep in mind that revenue concentration is a real risk and a significant portion of revenue comes from government contracts, which may be subject to budget constraints and policy changes.

Planet isn’t the only game in town, either. The geospatial data market is competitive, with major players like Maxar Technologies and Airbus Defense and Space.

With all that said, Planet Labs is a compelling investment opportunity driven thanks to its recurring revenue, international expansion, and technological advancements. Yes, there are inherent risks, but the potential rewards make Planet Labs a noteworthy consideration for investors seeking exposure to cutting-edge geospatial data solutions.