Should Investing in This Space Technology Stock Be Considered for 2025?
In the thrilling world of tech investments in 2024, one name that stood out was Planet Labs (PL), even though the hot sector that year wasn't necessarily outer space. This innovative company excelled, boasting a staggering 90% surge in its share price within a year, which ended on January 22.
The driving force behind this success story is Planet Labs, a tech firm that specializes in delivering satellite data about our beloved Earth to businesses and governments. Slated to continue its reign in 2025, Planet Labs is an investment prospect worth considering.
However, the stock had already scaled a 52-week high of $4.99 in December, and while it remained close to that mark as of the time of writing, the question lingers—should you buy now? Dive deep into the company's operations to determine if Planet Labs is a wise long-term investment.
Exploring Planet Labs' operations
Planet Labs takes pride in boasting the largest fleet of orbiting satellites in history—around 200 satellites. It makes use of this impressive armada to gather "the highest frequency satellite data commercially available" and sell licenses for access to this treasure trove of Earth-related insights.
The data offers an array of valuable insights, from monitoring deforestation and climate change to aiding disaster management. In the event of natural disasters, oil spills, or methane leaks, Planet Labs' data brings invaluable assistance. The agricultural sector also relies on this data for crop monitoring and harvest planning. In addition, government defense and intelligence make use of such data to bolster their capabilities.
Planet Labs' competitive edge marks the gulf between its service and that of legacy satellite companies. While its contemporaries magnetize data that's mere months outdated, requiring technical training to decipher, Planet Labs offers real-time, global coverage. Additionally, its data is simple to interpret and employ.
Financial performance and outlook
Whisked by its technological prowess, Planet Labs secured high-profile clients such as NASA, the U.S. Department of Defense, and even the German space agency. This robust customer portfolio backed it to achieve $61.3 million in record revenue during the Q3 fiscal, signifying an 11% year-over-year surge.
Despite the hefty costs associated with satellite launching and maintenance, Planet Labs successfully slashed its expenses year over year, resulting in a remarkable jump in the gross margin to 61%, a staggering leap from the previous fiscal year's 47%. By the Q4 fiscal, the company aims to further boost this margin to at least 63%.
Boasting an impressive balance sheet, Planet Labs held assets totaling $630.8 million, comprising $140 million in cash and equivalents. The total liabilities stood at $166.2 million, all debt-free. This robust financial position is fortified by $77.7 million in deferred revenue—a sizeable reserve generated by advance payments from customers, later converted to sales once services are fulfilled.
Regardless of the soaring revenue and shrinking expenses, Planet Labs remains a non-profitable entity. It posted a Q3 net loss of $20.1 million. It may come as a surprise, yet such losses are relatively common in fast-growing tech companies that prioritize expansion over profits.
On the upside, Planet Labs has shown incremental progress towards profitability, recording a decreased loss in the Q3 net compared to the previous year. The company anticipates achieving adjusted profitability on the basis of EBITDA in the Q4 fiscal. In the Q3, its adjusted EBITDA inched closer to profitability, with a loss of only $200,000—a continuous improvement for six consecutive quarters.
To sustain its revenue growth, Planet Labs has smartly employed AI to assist customers in rapidly extracting value from its data, which bolsters customer retention. Furthermore, the company seeks to branch out into new industries, in particular the burgeoning energy sector, to expand its clientele.
With expectations for Q4 sales hovering around $61 million, surpassing the $58.9 million mark of the previous year's Q4, Planet Labs is poised to round off fiscal 2025 with a revenue of approximately $244 million–a double-digit increase from fiscal 2024's $221 million.
The ultimate question: To buy or not to buy?
Planet Labs' impressive revenue growth, diminishing losses, and healthy financial position highlight a company potently building a successful long-term venture. Its monetary strength earns it a prominent spot on your investment watchlist for 2025.
However, the stock's current share price, hovering near its 52-week high, makes the decision to buy a tricky proposition. Let's unpack this conundrum using the company's price-to-sales (P/S) ratio as a tool.
The stock's P/S ratio might boast some edgy heights, hinting at investor enthusiasm, but not extreme levels that warrants overpricing concerns like during its earlier surges. Nevertheless, it doesn't qualify for a discount either. As the Q4 results are on the horizon, lingering for just a little longer might be rewarding.
After analyzing Planet Labs' financial performance, it's clear that investing in this company could be a wise decision due to its significant revenue growth, shrinking losses, and robust financial position. The company's focus on AI and expansion into new industries also adds to its potential for long-term success. However, considering that the stock is currently near its 52-week high, careful consideration and patience is advised to potentially benefit from any potential price fluctuations following the Q4 results. This strategic approach could help ensure that investors are entering the market at an optimal price point.
