New Planet Labs Price Target After CEO Touts Cash Flow Progress

I know. I have plenty of names that readers have asked about on my docket, but with the way that markets have moved of late, I have had to consistently update existing "Stocks Under $10" positions as they have all required some attention. 

Thursday is no different. Readers will recall that I wrote back on October 7 that it was time for me to take a little something off my long position in Planet Labs  (PL)  as the stock had soared well past our $9.75 target at the time.

I created a new target of $20 at the time based on the trend and not on actual technicals but informed that getting down to or as close to "house money" as possible was probably the wise move at that time. 

Planet Labs traded as high as $16.01 and has come in more than 18% since. It's time, at least for me, to consider adding some of those shares back on. I actually started piecing that position back together on Wednesday afternoon. I still need to add another chunk to the position to get back to full size. PL is not a top-20 position for me at this time in terms of weighting. I would like to get it to where it's just outside of my top 15 with a weighting of 2%-ish.

Earnings

The firm will report its third quarter financial results in December, so we're still a way out. At this time, Wall Street is looking for an adjusted EPS of -$0.04 on revenue of about $72 million. Though that would not compare well to the year-ago comp of -$0.02, the sales print would be good for year-over-year growth of more than 17.5%. The firm is projected to grow sales at this pace or better for every single quarter this year and to come close to cutting full-year losses per share almost in half.

The CEO

During last week's analyst/investor day, chairman and CEO William Marshall, who happens to be a co-founder, had a lot to say. I think this excerpt from his address sums up why we are in this name:

"We've made excellent traction on the business, catapulting us to positive cash flow this year, a year ahead of our plan. And these two initiatives are highly synergistic. Not only do the satellite services turn a former cost center to a profit center, but they also add capacity and increase revisit rates, which benefits all of our customers. And Charlie will go into that more in his section.

"Next, these two initiatives have driven significant acceleration, leading to a year-on-year quarterly revenue growth rate doubling through the course of this year. We expect that growth rate to continue accelerating into next year, underpinned by our strong backlog, which has tripled in the last year, and Ashley will provide more details on the financials in her presentation.

"And then thirdly, Planet is experiencing two key tailwinds. First, the change in geopolitical landscape, which creates an immediate imperative for nations to want eyes to understand threats in their neighborhood. And the shift also reflects the changing nature of modern warfare, and you'll hear that from Oleksii soon. Commercial drones, satellites, AI and cyber are becoming the foundation for security, not just peripheral."

Analysis 

Of the six sell-side analysts that I know of who do cover this name, five have revised their earnings estimates higher since the start of the period while one has revised that estimate lower. This week alone, three highly rated analysts have revised their target prices higher.

1. Michael Latimore (five stars at TipRanks) of Northland Securities reiterated his "buy" rating and took his target from $10 to $16
2. Ryan Koontz (five stars) of Needham reiterated his "buy" rating while taking his target from $12 to $16
3. Edison Yu (four stars) of Deutsche Bank reiterated his "buy" rating, while taking his target from $10 to $16

Where Am I?

Readers will see that, as the uptrend broke, both relative strength and the daily MACD weakened. There has been a fight around the 21-day EMA, and it looks like the swing crowd is playing both sides of the coin in that area. 

My plan is to use this area in between the 21-day EMA (currently $13.10) and the 50-day SMA (currently $10.70) to get my position back up to full strength. My new pivot drops to the 21-day EMA. This, in turn, will drop my target price from $20 to $17.

At the time of publication, Guilfoyle was long PL equity.