Here Are the Planet Labs Price Levels I'm Watching to Initiate Position
The satellite imagery provider has seen some positive news lately, here's where I'd buy.
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This name is another former "Stocks Under $10" portfolio name. No, this is not another Sarge story of victories won, but rather a tale of a stock abandoned that later made good.
Planet Labs PL was a $2 stock for most of the time we had it in the portfolio. We thought there was some good reason to be involved. Wall Street, at least while we were there, disagreed. A reader brought the name to my attention a few months ago. I looked. I saw nothing. That reader reminded me recently that I had never really taken an in-depth look for a good while and that the stock was starting to run. Really? Yes, really. PL was still a $2 stock into November. This week, the shares traded above $6.50. Wow. Got my attention now.
Who Are These Guys?
Planet Labs describes itself as a provider of global, daily satellite imagery and geospatial solutions.
The San Francisco-based firm designs, builds and operates its own fleet of imaging satellites, providing mission-critical data and advanced insight to its clientele, which includes members of the agriculture, forestry, intelligence, education and financial industries. The firm's data and analytics aid in the solving of problematic issues connected to deforestation, climate change, biodiversity and ripples in supply chains. The images are analyzed and delivered over the firm's cloud platform as changes occur.
Planet Labs Upcoming Earnings
Planet Labs will report the firm's fourth quarter financial results after the close of business on March 28, 2025.
Wall Street is looking for an adjusted EPS of $-0.02 on revenue of almost $62 million. That would compare to the year ago comps of $-0.06 and $58.85 millioon, so this would be sales growth of just 5.2%. Positive, but actually a deceleration from the past two quarters where the firm printed year-over-year growth of 10% followed by 14%. That said, all seven sell-side analysts that track the stock have increased their earnings estimates since the start of the fourth quarter.
Recent Positive News
- On January 29, PL signed a multi-year $230 million contract to expand on a long-standing deal with an Asia-Pacific client.
- On January 24, Cantor Fitzgerald analyst Colin Canfield (three stars at TipRanks) initiated coverage of PL with an "overweight" (buy-equivalent) rating and a $6.30 target price. That was up 14% from the last sale at the time.
- The firm was selected by the National Geospatial-Intelligence Agency as one of the vendors for the $200 million Luno B commercial data contract.
Planet Labs Stock Fundamentals
As of the end of the October quarter, Planet Labs had generated $-14.9 million in operating cash flow over the trailing 12 months. Tack on cape spending of $41.6 million and we're talking about 12 months of free cash flow of $-56.5 million.
Turning to the balance sheet, again, as of October, the firm had a cash position of $242.2 million and current assets of $301.6 million. Current liabilities ran at $129.1 million, of which there was $66.5 million worth of unearned revenue (not a true financial obligation) and no short-term debt. This puts the current ratio at an impressive headline level of 2.34. Once adjusted for the unearned revenue, this ratio improves to 4.82. Very strong.
Total assets amounted to $630.8 million, including $184.9 million in goodwill and other intangibles. At 29% of total assets, this is on the high side, but not something crazy. Total liabilities less equity came to $166.2 million. This also included no long-term debt. Very nice balance sheet for a small firm without positive cash flows.
My Thoughts on Planet Labs Stock
I don't know if there is enough momentum here to feel especially confident in where the shares are going. I do like the balance sheet. The firm can continue to survive as it struggles to grow. I also like that Benchmark's Josh Sullivan (five stars) has a buy rating on the stock with a $7 target price. Technically, I do see a potential hazard...
Readers will see that the shares have started to come in a little. Relative strength is still excellent but softening. The daily MACD is still bullishly postured, but the 12-day EMA is curling down towards the 26-day EMA. I think there is a chance that the stock is developing a head-and-shoulders pattern. This would be bearish if realized.
I would not add, nor initiate here. I would rather hold off to see if either the 21-day EMA or better yet, the 50-day SMA is tested. That's when we'll find out if this is an H&S or not. On the other hand, if the stock can make a new high above $6.55, then I think it would be game-on and the force, I mean momentum, could be with this one.
In short, I would buy the name either below $4.50 or above $6.55, but not in between, unless a new pattern develops. That said, if I had been long since 42, I would probably start getting my principal out of the name, leaving just the house money.
At the time of publication, Guilfoyle had no positions in any securities mentioned.
