Why Planet Labs Shares Soared Today

What happened

Tuesday marked another volatile day of trading for small-cap tech company Planet Labs (PL -0.57%), which debuted on the New York Stock Exchange in the first week of December. The stock was up by about 14.4% as of 3:06 p.m. ET.

Such volatility is understandable for a speculative technology company, and even more so given the overall market conditions of late.

But there were no fundamental business reasons to be found for the stock's rise. Instead, it's likely down to investors' reaction to some share-buying by company insiders. Niccolo di Masi, who sits on the board of directors, recently purchased $245,000 worth of Planet Labs stock, according to SEC filings. In addition, Kevin Weil, the president of product and business, recently bought around $100,000 worth of stock. 

The figures may not seem particularly large, but they are de-facto votes of confidence in the company's future by those with the clearest insight into the business. And those endorsements were more than welcome, considering that the stock is still down by more than 40% since it began trading on Dec. 8.

So what

There haven't been any major fundamental developments for the company since it went public, so its share prices moves are largely being driven by market sentiment. The underlying story behind Planet Labs remains the same as it was before.

The satellite network operator is a provider of data and insights about the Earth. Its end markets are relatively diverse: 24% of its revenue comes from civil engineering, 23% from agriculture, and 22% from

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">defense & intelligence. Its other primary end market is mapping, which accounts for 17% of sales.

Examples of how its data and images are used include farmers and agriculture companies monitoring infestations, governments monitoring military hardware movements, and forestry companies monitoring deforestation. These are exciting areas to be in, not least as agricultural companies are increasingly adopting digital technologies and industry peers like Trimble are becoming increasingly involved in the daily work schedules of their customers. 

Now what

Planet Labs came to the market in order to raise funds ($590 million) to invest in growing its sales force, its technology, and its analytics capabilities. As such, the key metric that every investor will be following is revenue growth. Given that 90% of its revenue is recurring and its end markets look favorable, the opportunity ahead of the company is significant.