When it comes to big data companies, most investors have heard about Palantir Technologies or Snowflake, but there is one company investors might be overlooking. Planet Labs (PL 1.49%) is capturing an immense amount of data by imaging the entire world daily. 

Planet Labs' vast data resources dating back years could allow its customers to spot trends and predict future outcomes, but is this company a buy today? The company is doing something extremely innovative and it has major growth opportunities, but Planet Labs might only be investable for investors with a highly diversified portfolio. 

Satellite flying over land mass.

Image source: Getty Images.

Planet Labs was founded in 2010, and since then it has created the largest satellite imaging fleet in history with over 200 satellites currently taking pictures of the Earth. This fleet is 10 times larger than some of its competitors', and it has one of the extensive image catalogs of Earth today. Planet Labs is similar to a Bloomberg terminal for Earth's data, and it provides this data so its customers can identify patterns in the world today. Some examples of the type of data provided by the company are shifts in forestry, geo-mapping, and agriculture.

The world at its fingertips

With one of the world's largest operational fleets and image archives of the Earth, the company has an incredible scale advantage over its competitors. Huge satellites can cost billions of dollars to produce and launch, and even Planet Labs' satellites -- which are the size of a bread loaf -- can cost around $600,000 to produce and launch. This incredible up-front cost to research, develop, and launch a fleet as vast as Planet Labs' would cost millions of dollars if not billions, making it extremely hard for competitors to catch up. 

The ability to image the entire Earth every single day gives the company a major scale advantage. Compared to a competitor that may lack the speed in imaging, all data can be offered by Planet Labs with a wider context and likely more pertinent information to perform analysis.

As a result, Planet Labs has been able to capture and create strong relationships with some big-name customers. The company has over 740 customers, including NASA and the U.S. Department of Defense. These customers pay a subscription for access to specific images over the world, resulting in 94% recurring revenue for the company. At $31.7 million in revenue in the third quarter of fiscal year 2022 (period ended Oct. 31), Planet Labs' relationships with its customers are lucrative: The company averages almost $43,000 in quarterly revenue per customer. 

What's next for Planet Labs?

Simply selling images each month is not an appealing business model, but what exciting about the company is what it wants to become. Planet Labs is looking to develop analytic assistance for its customers, allowing its customers to find insights quicker and easier.

To do this, the company has acquired VanderSat, an Earth analytics provider. The acquisition was completed in December 2021 for $28 million. VanderSat specifically focuses on monitoring and understanding crop health, but Planet Labs hopes to use VanderSat and its technology to broadly offer actionable information and insight from its Earth imagery. This growth avenue and acquisition could allow Planet Labs to become not just a data provider, but also an analytics platform that gives an actual insight into trends and patterns going on in the world today.

Going even further, the company wants to employ machine learning technology to spot indicators and make predictions. If the company can analyze the trends derived from its images, it could also find and develop indicators of future events. For example, it could use its images to monitor patterns seen in farms to predict future gross domestic product.

Some important considerations

Planet Labs' growth opportunities are very exciting, but it is important to remember that they are just that: opportunities. While the company is currently exploring the possibility of adding insight capabilities, Planet Labs is still currently just a data platform. Right now, the financials reflect that. The business has a net retention rate of just 105%, meaning customers are spending just 5% more today than they did one year ago. Compared to data analytics companies like Snowflake -- which has a retention rate of 173% --- this is quite low. 

Additionally, the company is losing plenty of money. In Q3, the company lost $41 million, which was $10 million more than it generated in revenue over the same period. This grew roughly 32% year over year while revenue only grew 17% over the same period. A company that is improving its profitability would have revenue growing faster than its losses, so this is concerning. If Planet Labs can consistently increase net retention and draw in additional clients with the expanded offerings, it could potentially find footing to get the income in the black.

Is it a buy?

For most investors, it would be wise to watch this company closely rather than take a position, because the investment thesis rides on its analytics future. If it can begin to offer insight into the data it provides, that would make Planet Labs magnitudes more valuable for its customers. This value would result in higher retention rates and stronger revenue growth. This would also make Planet Labs more accessible to smaller customers that might not have the internally developed analytics platforms, and that could rely on Planet Labs to analyze the data. 

This growth opportunity is a major one, and if it can be successful, I would be happy to add this company to my portfolio. However, that avenue has not been fully realized yet. For investors who have a diversified portfolio, it might be wise to take a very small position today in hopes of Planet Labs achieving this goal. Although for most investors, the best move is probably to wait to invest until the company begins offering this analysis to its customers at scale.