Will This Space Stock Ever Escape Orbit?

Less than a month ago, Planet Labs (NYSE:PL), a space stock with the largest constellation of Earth-scanning satellites, traded as high as $2.84 per share. However, a poorly received earnings report led to shares crashing to lows of $1.78 per share on September 6 before modestly bouncing.

A closer look at the earnings report reveals good financial progress, so why did PL share price plunge and can this space stock ever escape orbit?

Solid Earnings But Forecasts Fall Short

Planet Labs CEO, Will Marshall, clearly didn’t wow investors but the numbers reported don’t explain away the sharp reaction from investors.

The headline earnings figures revealed sales up 14% year-over-year to a respectable $61.1 million. The company reported a loss of $0.06 per share, in line with analysts’ estimates. So why did shares plunge over 28% from a high of $2.51 per share the day prior to earnings?

It seems that investors weren’t so much displeased with sales falling $0.7 million short of estimates as they were disappointed in the upcoming quarterly forecasts.

Analysts expected management to guide towards $64.2 million when in fact they suggested a range between $61 million and $64 million was more likely. The lower expectations versus consensus were enough to trigger a sharp selloff in Friday’s trading.

A deeper dive reveals that perhaps these numbers alone didn’t catalyze the selloff so much as the string of lower revisions from management in recent years. After all, it was only 3 years ago when Planet Labs had projected as much as 44% annualized growth after going public via a SPAC sponsored by dMY Technology Group.

Now that revenue run rates and margins have come in substantially lower than initially forecast, what does the future hold for Planet Labs? Will this space stock defy gravity or plummet back to earth?

Is It Time to Buy The Fear?

Although the reaction of investors to Planet Labs earnings would suggest something was materially awry, the financials suggest otherwise.

Over the last 12 quarters, Planet Labs has reported increasing revenues on a year-over-year basis in each and every quarter.

Since Q1 2022, earnings before interest and taxes have largely been trending in the right direction from a loss of $56.1 million then to losses under $40 million in recent quarters. The gross margin has shown improvement too, climbing to 53% on a GAAP basis and 58% on a non-GAAP basis.

With revenues up, margins increasing and losses improving in recent quarters, is it time to buy the fear?

The bull case for Planet Labs points to a slow and steady improvement of key metrics on the profit and loss statement alongside $249 million of cash and equivalents on the balance sheet and no debt.

The bird’s eye view is that Planet Labs now trades at a market capitalization of around $520 million while having cash and a revenue run rate both near $250 million. Those numbers suggest that while sentiment is dim on this space stock right now, it’s time in the sun may yet come.

Analysts seem to think there is upside of as much as 122% after this recent selloff with $4 per share as the consensus.