Planet Labs PBC (PL - Get Rating) in San Francisco is a satellite imagery and data specialist company that went public through a reverse merger with blank check corporation dMY Technology Group IV on Dec. 8, 2021. 

PL has registered as a public benefit corporation. It aims to “accelerate humanity to a more sustainable, secure and prosperous world by illuminating environmental and social change.” PL has launched more than 500 satellites since its incorporation 10 years ago.

The company raised more than $590 million through its dMY Technology Group IV merger and PIPE funding. It expects to use $200 million of the total capital raised as operating capital until it generates positive cash flows, while $300 million is reserved for expansion or industry consolidation strategies.

Here is what could shape PL’s performance in the near term:

Acquisition

PL acquired leading advanced earth data and analytics provider VanderSat on Dec. 13, 2021. The acquisition is designed to strengthen its operations in the agriculture market by utilizing VanderSat’s innovative products to promote water management and crop health among customers in major markets. However, PL paid $28 million in a combined cash and stock for the merger transaction. But given its nascent position in the agriculture markets, PL might take a while to generate profits from this acquisition.

Poor Financials

PL’s revenues increased 16% year-over-year to $31.70 million in its fiscal 2022 third quarter, ended Oct. 31, 2021. Its recurring annual contract value increased 100 basis points from the same period last year to 94%. However, net loss came in at $41.50 million. This can be attributed to increased research and development expenses, SG&A costs, and public company costs. In addition, its adjusted EBITDA loss amounted to $12.30 million.

Mixed Growth Prospects

PL expects its revenues to range between $35 million – $37 million in its fiscal 2022 fourth quarter (ending January 2022). Its non-GAAP gross margin is expected to rise sequentially to range between 37% – 39%.

However, the company’s adjusted EBITDA loss is expected to worsen from the prior quarter’s value. It is expected to range between $17 million – $15 million. This can be attributed to increased investments to scale its organization and expand its software engineering capabilities.

POWR Ratings Reflect Bleak Prospects

PL has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

PL has a D grade for Value and an F for Sentiment. Its negative EV/EBITDA multiple justifies the Value grade. In addition, analysts expect the company’s EPS to remain negative until at least this year, in sync with the Sentiment grade.

Of 75 stocks in the D-rated Air/Defense Services industry, PL is ranked #61.

In addition to the grades I have highlighted above, view PL ratings for Growth, Momentum, Stability, and Quality here.

Bottom Line

Shares of PL have slumped 48.3% in price since its stock market debut to close yesterday’s trading session at $5.59. This reflects investor concerns surrounding the company’s poor financials and negative profit margins. Furthermore, PL’s bottom line is expected to remain negative in the near term. The company expects to attain positive EBITDA on an adjusted basis by early 2025. With negative shareholder returns, we think investors should avoid the stock now.

How Does Planet Labs PBC (PL) Stack Up Against its Peers?

While PL has a D rating in our proprietary rating system, one might want to consider looking at its industry peers, Elbit Systems Ltd. (ESLT - Get Rating) and Northrop Grumman Corp. (NOC - Get Rating), which have an A (Strong Buy) rating.

PL shares were trading at $6.34 per share on Friday morning, up $0.75 (+13.42%). Year-to-date, PL has gained 3.09%, versus a -2.48% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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