Is This Space Stock Set For Blast Off?

It’s not every day of the week we cover stocks trading under $5 per share, which are technically considered penny stocks. It’s rarer still to discuss those trading under $2 per share, but one space stock now is just too interesting to gloss past.

Before proceeding further, we must first note that this stock has been nothing short of a train wreck for shareholders since first going public via a SPAC sponsored by dMY Technology Group.

Like just about all SPACs it first traded at the $10 mark, but soon dipped, and then fell further and continued to slide, and now sits at under $2 per share. If we can manage to channel our inner Buffett and ignore price for a moment and pay attention fundamentals, what do they tell us about whether Planet Labs can blast off?

Key Points

• Originally listed via a SPAC at $10, Planet Labs now trades under $2 due to profitability struggles and slowed growth, presenting a high-risk, high-reward investment opportunity.
• Planet Labs provides valuable satellite imagery used by governments and corporations, generating substantial revenue. However, profitability issues and high cash burn have dampened investor enthusiasm.
• Strategic improvements in product monetization could unlock future growth, though this comes with substantial risk.

Why So Low?

On the surface, Planet Labs has all the signs of being a popular company with the backing of institutional investors. The story is compelling. Planet Labs captures imagery of every point on the surface of the earth every day and has the largest data set of any satellite provider.

Those images can be used to help General Electric identify power line faults and the Brazilian government spot new illegal logging paths. The number of use cases is enormous and it’s almost hard to imagine how wide a prospect list the company has feeding into its sales pipeline.

And it’s not like the company is an up-and-comer with no revenues. Far from it, CEO Will Marshall’s firm generates hundreds of millions of dollars annually and has continued to grow the top line, albeit at a slower pace than originally forecast.

Where bears have got their claws stuck in is the lack of profitability and high cash burn alongside the slower pace of growth. But now the stock trades so low that it might well be worth the potential reward.

Why Now?

It’s hard to imagine that PL share price dipping below $2 per share didn’t ignite some kind of fire at Planet Labs HQ. Even bouncing up to $1.89 per share at Monday’s close, PL has a market cap of just $549 million. When you consider it has about $300 million in cash and equivalents, the operations of the firm are barely trading above 1.0x sales.

That seems too pessimistic, even for a company that has disappointed investors with each passing quarter by sequentially lowering guidance. Revenues of $224 million in the most recent quarter suggest that Planet Labs is offering sufficiently compelling value to win over a whole swath of customers, ranging from governments to utilities.

What it needs to do a better job of is turning its data into product solutions that customers are demanding. The CEO is keenly aware of that and so you would think it’s just a matter of time before more customers find even more value in Planet Labs, at which time the sky is the limit.

Still, it may require patience before this space stock escapes orbit. So far, each attempt has led to a plummet back towards earth. And there is still a chance of a crash landing, but to the risk-seekers, the upside to downside ratio is increasingly attractive.