"From infancy on, we are all spies; the shame is not this but that the secrets to be discovered are so paltry and few." ― John Updike
Today, we put a fascinating small cap concern called Planet Labs PBC (NYSE:PL) into the spotlight for the first time. The company is in a unique niche of the economy, and it is our first look at this sector. Like so many fast growing but unprofitable concerns, the shares have taken a big hit as a bear market has descended on investors here in 2022. Can the shares rebound? We attempt to answer that question via the analysis below.
Planet Labs PBC is based in San Francisco. It serves the agriculture, mapping, forestry, and finance and insurance industry, as well as federal, state, and local government bodies. The company designs, constructs, and launches constellations of satellites with the intent of providing high cadence geospatial data delivered to customers through an online platform worldwide.
Planet Labs provides daily satellite data that helps businesses, governments, researchers, and journalists understand the physical world and act upon this data. Planet Labs delivers this service via cloud-native proprietary technology that performs critical processing and overall harmonizing of images for time series and data fusion and analysis. Planet Labs also provides space-based hardware and related software systems. The company basically images the entire Earth daily, archives it and provides real-time access to it as well. One of keys to its business model are low-cost and easy-to-launch satellites.
The company came public late in 2021 via business combination transaction with dMY Technology Group, Inc. IV, concurrent private placement, and completed public listing. This raised approximately $590 million in proceeds. With the recent downturn in the shares, the stock sells right over $5.00 a share and sports an approximate market capitalization of just south of $1.4 billion.
The company posted fourth quarter results at the end of March for the FY2022 year. The company's fiscal year runs into the end of January each year. The company lost 26 cents a share on a GAAP basis, which was a dime a share below the consensus. Revenues rose over 22% on a year-over-year basis to just north of $37 million, which slightly exceeded expectations.
For FY2022, the company garnered $131 million worth of sales and its customer count now stand north of 750 and grew 25% on a year-over-year basis. Non-GAAP gross margins expanded to 42% for the fourth quarter compared to 25% in the prior year period. Adjusted EBITDA loss was $16.7 million for the quarter and $41 million for the full year. Management expects revenues to be between $38 million to $41 million for 1Q 2023 and between $170 million to $190 million for FY2023.
In mid-January, 44 SuperDove satellites, were successfully launched into orbit on a SpaceX (SPACE) Falcon 9 rocket. These satellites join the company's existing fleet of roughly 200 satellites in orbit. 90% of these are SuperDoves which cost approximately $300,000 apiece and have a three-year life in space.
The analyst community is sanguine around the prospects for the company. So far in 2022, four analyst firms including Goldman Sachs and Needham have either initiated or reiterated Buy ratings on the stock within a tight price target range of $10 to $11 a share. Here is the commentary from the analyst at Piper Sandler that initiated the shares as a new Buy with a $10 price target on January 7th.
The company is leading the "Digitization of Everything" via its unique earth imagery data. Planet Labs has a constellation of over 200 satellites, capturing every point of land on earth daily. The analyst believes the company is an "early segment leader, with a complete constellation and proprietary data platform, providing it with significant competitive advantage."
Three officers of the company including the CEO purchase just over $1.3 million of shares in aggregate in mid-December. There has no insider activity in the stock so far in 2022. Less than three percent of the outstanding float of the stock is currently held short. Alphabet (GOOG) owns just over 10% of overall shares in Planet Labs. The company ended FY2021 with approximately $490 million worth of cash and marketable securities on its balance sheet. Leadership believes this cash hoard is more than enough to get the company to break even status over the next few years.
The current analysis consensus has Planet Labs posting a net loss of roughly 60 cents a share in FY2022 as revenues rise nearly 40% to just over $180 million. Planet Labs is a fascinating company. Its recurring subscription model should be highly scalable and provide very high margins as the network gets completely built out. One would think the company would have a significant moat given one can't just snap together a large satellite network with the platform to deliver data globally at the drop of a hat. Planet Labs also has a massive archive of screen shots from every spot on the planet.
The need for this kind of data will continue to grow across many parts of the economy, from agriculture to defense in the coming years. Over time, the company will expand its offerings into additional vertical markets. Eight times forward sales might seem expensive for an unprofitable firm. However, equating for cash, PL goes for just over five times forward revenues.
While the current market has been very tough on growth concerns still posting losses, PL seems to merit a small 'watch item' holding given its long-term potential and rock-solid balance sheet. That will be my game plan this week via covered call orders.
"Spies and parents never sleep." ― Linda Gerber
Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum
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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in PL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.