Stunning Penny Stock To Own For Next 10 Years
As we wait for the Q1 2023 earnings statement in a couple of days from Planet Labs (NYSE: PL), we look to the recent past for benchmarks of performance. The company beat its Q3 2022 earnings projection by one cent as it did in Q4 2022, when it beat by two cents, though it missed analysts consensus in Q2 2022 by two cents and by twelve cents in Q1.
Key Points
- Planet Labs has consistently beaten earnings projections in recent quarters, strengthened partnerships, and expanded its client base.
- The company offers satellite imaging and data catalog products to customers in various industries, with revenues growing as forecast in SPAC projections.
- Planet Labs currently faces so-so profitability due to high operational expenses, but remains highly liquid with no debt and a three-year cash runway.
Since those early 2022 quarters, management has delivered on forecasts, strengthened existing partnerships and forging new ones. From a fiscal standpoint, the company has no debt on the books and based on its cash flows, the company maintains a three-year cash runway. It continues to expand its client base and landed contracts with government agencies and educational institutions, including:
Planet Labs & NASA Harvest Partner to Advance Food Security
On January 12, 2023, Planet Labs and NASA Harvest introduced a commercial partnership to use satellite imaging to help ensure food security by monitoring crops across the globe.
The Planet Labs product will deliver “policy-grade agricultural monitoring” to NASA Harvest that notes and assesses potential global food security threats. The same technology has crime-fighting applications since satellite measurements can detect fields of illegal growth plants, such as marijuana and poppies.
Planet Labs and ASU Expand Strategic Partnership
Planet Labs forged a partnership with Arizona State University with the goal of helping individuals address climate change through a four-prong platform consisting of education, research, workforce development, and scientific innovation.
The partnership helps organizations to attract and develop top talent and also focuses on scientific and technological breakthroughs.
What Does Planet Offer Customers?
Besides its satellite arrays, Planet Labs creates a data catalog that it distributes using an automated cloud platform. Customers access the company’s images and assessments in the cloud. Planet then uses machine learning to improve and adapt its products. Its current platform and products include:
- Planet APIs
- Planet Apps
- Planet Basemaps
- Planet Fusion
- Planet Analytics Feeds
So far, its customers range from agriculture to forestry, intelligence to education, and finance to government organizations.
Good Sales, So-so Profitability
The company continues to grow revenues through an ever expanding customer base. In the fiscal quarter ending October 31st, FY23, Planet Labs sales totaled $49.7 million, a 57% year-over-year increase. It landed 864 new customers, for a year-over-year increase of 16%. That continues a three-year trend of increased customers.
With sales up and new customers flowing in, you might expect higher profits, but the company’s high operational expenses have led to poor profitability. Despite quarterly sales totaling $49.7 million, Planet Labs barely remained profitable because its operating costs seriously outpaced its sales. Costs came in at $67.61 million. Of that figure, sales, general, and administrative expenses (SG&A) comprised $40.01 million.
It’s not really a knock on the company to see so-so profitability at this stage given that reinvestment and expansion is such a big part of the strategy now.
Financial Benefits and Risks
Planet Labs has managed to remain highly liquid, with cash and equivalents totaling $425 million, which translates to a three-year cash runway.
The company carries no debt, which shows a healthy bottom line, but it would need to dilute its shareholders or spend a sizable chunk of its cash to invest in expansion without incurring debt.
So far, the company has used stock dilution as a means of funding, though it has only been a modest amount compared to other high growth firms. Nevertheless, eating up its own equity or diluting its shares won’t win fans with its stockholders or new investors.
What Next for Planet?
Although the risk of stock dilution remains real, Planet Labs is a rare SPAC that has delivered on its forecasts. It established a revenue stream that continues to grow. The public, educational institutions, and businesses enjoy its climate products. This product’s popularity has led to increased sales.
Yes, Planet has yet to reign in its SG&A costs but during its expansion phase heavy spending in that category is to be expected. Still, it’s worth paying attention to that chunk of its operating costs, which comprises about two-thirds of the operating costs budget.
The bottom line is Planet Labs is an appetizing penny stock thanks to new partnerships and contracts with government agencies and education institutions. If you are willingly take on a bit of risk, now appears to be a great time to start a position, otherwise keep this one on the radar.
