PL - The Prognosis For Planet Labs

2023-11-16 15:31:40 ET

Summary

• Today, we take a look at Planet Labs PBC, a small cap company that designs and launches satellites to provide geospatial data to customers.
• The company has an intriguing business model, is focused on bringing down operational costs and has a rock-solid balance sheet.
• An analysis around Planet Labs is presented in the paragraphs below.

There will come a time when it isn't 'They're spying on me through my phone' anymore. Eventually, it will be 'My phone is spying on me '.”? Philip K. Dick.

Today, we put Planet Labs PBC ( PL ) in the spotlight. This satellite-related concern is aiming at a growing market and losses should drop significantly in coming years. That said, the company has disappointed investors with its last couple of quarterly reports even while delivering decent sales growth. What's ahead for Planet Labs? An analysis follows below.

Company Overview:

Planet Labs PBC is headquartered in San Francisco. The company designs, constructs, and launches constellations of satellites. These are used to provide high cadence geospatial data delivered to customers through an online platform. Planet Labs offers its clients planet monitoring, base maps, tasking, apps, variables, hyperspectral, analytic feeds, and platform as well as assorted other services. The stock trades just below $2.50 a share and sports an approximate market capitalization of $680 million. The company's fiscal year begins on October 1st.

The company's low-cost network of easy-to-launch satellites images the entire Earth daily, archives it and provides real-time access to clients via its cloud-native proprietary technology and platform. Customers pay for these services on a subscription basis. Approximately 55% of the company's overall revenue comes from North America.

Second Quarter Results:

The company reported its second quarter numbers on September 7th. Planet Labs delivered a non-GAAP loss of seven cents a share in the quarter, largely in line with expectations. Revenues rose just under 11% on a year-over-year basis to $53.8 million, slightly under the consensus forecast. Revenue growth was in line with a 10% increase in total customer count, to 944 from the same period a year ago.

The company's primary client base is in the agriculture, mapping, forestry, and finance and insurance sectors. It also serves federal, state, and local governmental bodies. Gross margins improved to 49% from 48% from the prior period a year ago. Management provided the following forward guidance.

FY2024 guidance was about $10 million below the analyst firm consensus causing the stock to drop in the mid-teens during the day second quarter numbers were posted. A similar guidance disappointment after first quarter numbers caused a similar fall in the stock it should be noted. In late September, Planet Labs re-upped an agreement with NASA that will provide it a bit over $18 million in funding through year end 2024.

Analyst Commentary & Balance Sheet:

Since second quarter results were posted in September, eight analyst firms including Goldman Sachs and Needham have reissued Buy/Outperform ratings on Planet Labs. Price targets proffered range from $4.90 to $7.00 a share. Three of they buy reiterations had minor downward price target revisions, it should be noted.

Just under four percent of the outstanding float in the shares is currently held short. The company had no insider sales of stock as a public company until April of this year. Since then, several insiders have sold just under $300,000 worth of equity collectively. The company ended the first half of this year with just over $365 million worth of cash and marketable securities on its balance sheet . Planet Labs also carries no long-term debt. The company had an adjusted EBITDA loss of $14.5 million in the second quarter.

Verdict:

Planet Labs had a loss of 61 cents a share in FY2023 on just over $190 million in revenues. The current analyst firm consensus has losses being cut in half in FY2024 as sales rise to some $220 million. In FY2025, they see 21 cents of losses per share on 20% revenue growth.

Planet Labs is aiming at an expanding market. The company has consistently grown its customer base and has a high renewal rate for its subscription services. Planet Labs also has a rock-solid balance sheet. The company announced a layoff of 10% of its employee count in August to help reduce costs it should be noted. Leadership expects to take a $7 million to $8 million non-recurring restructuring cost when it reports Q3 results. Management also expects total operational costs to be reduced by $35 million in FY2025 compared to where they were projected at the start of FY2024. AI is also a potential new commercial opportunity for the firm as well.

Overall, I like Planet Labs PBC's business model and longer-term potential. However, the stock has destroyed a good chunk of shareholder value in the last few years, and Planet Labs has disappointed investors in each of its last two quarterly reports and guidance. A fresh set of data points will be available in early December when the company posts third quarter results. While this is a story worth watching, I want to see more progress on the profitability front before I make an investment in Planet Labs.

In a total surveillance state, complicity is much more likely than ignorance .”? Cliff Jones Jr.

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