The surge in Planet Labs' shares occurred on Tuesday.
On a lackluster day for the stock market, space tech company Planet Labs saw a breakaway success on Tuesday, climbing 3.8% after revealing updates on its fleet of Earth-observing satellites. As the clock struck 3 p.m. ET, shares of Planet Labs were trending upward.
In the afternoon, Planet Labs gave investors a rundown of the recent revamp of its satellite fleet. With an impressive array of around 200 medium-resolution Dove and high-resolution SkySat satellites circling the Earth, Planet Labs has one of the biggest satellite constellations globally – a title it shares with SpaceX, currently a private entity.
This morning, Planet Labs unveiled its intention to advance its constellation by deploying 36 new SuperDove satellites along with a brand-new Pelican-2 high-resolution satellite, propelled into orbit on SpaceX's Falcon 9 "Transporter" rocket.
Is Planet Labs Stock Worth Buying?
At first glance, it may appear that Planet Labs is exponentially growing its satellite fleet by 19% with this update. However, that's not entirely accurate. In fact, Planet Labs maintains that 200 satellites are already an ideal size for its constellation.
In this scenario, old Doves will be retired from duty and burn up in Earth's atmosphere, to be replaced by the superior SuperDoves as they are launched. This continuous swap-out process not only allows Planet Labs to regularly upgrade its technological capabilities but also keeps the company pumping $40 million annually into capital expenditures (capex).
Until Planet Labs achieves a point where its operational cash flow is sufficient to offset these capex costs, it will continue to operate at a negative free cash flow.
And so, eager investors must remain cognizant of the underlying implications – a constant flow of investments into capital expenditures and the ongoing negative free cash flow.
Enrichment Data
In the pursuit of boosting its satellite fleet and market position, Planet Labs is sealing a significant investment deal worth $230 million with a long-standing Asia-Pacific commercial partner. This collaboration encompasses two primary components:
- New Constellation Expansion: Planet Labs will construct and deliver a new constellation of Pelican high-resolution satellites, ensuring a specific capacity for this partnership's use. Additionally, the partnership will benefit from Planet's operational services, leveraging the expanded fleet's capacity to cater to its governmental and commercial customers globally.
- Revenue Recognition and Financial Impact: This revenue will be recognized over approximately seven years, encompassing both the satellite build as well as the operational service period. The agreement is predicted to become financially beneficial by FY'26, enhancing Planet's financial stability and strengthening its financial position beyond that. This strategic move strengthens Planet Lab's position in the satellite services market, boosting its revenue streams without incurring additional debt.
- Operational Efficiency: To manage operational costs effectively, Planet Labs intends to meticulously mitigate potential financial difficulties caused by the extended revenue recognition period.
- Long-term Outlook: This agreement represents a crucial component of Planet's strategy to explore various satellite systems, including Pelican, Tanager, and SuperDove satellites, across diverse sectors including defense, intelligence, civil government, and commercial ventures.
Following the announcement of its strategic investment deal with a Asia-Pacific partner, Planet Labs is expected to invest significantly in its satellite fleet expansion. This includes building a new constellation of Pelican high-resolution satellites and upgrading its operational services, all funded by the $230 million agreement.
Despite the continuous investment in capital expenditures, Planet Labs is striving to maintain a balance by retiring older Dove satellites and replacing them with superior SuperDoves, ensuring a steady influx of funds for technological advancements.
