By now you've heard the news.

Planet Labs PLC (PL 2.83%), the space stock that that went public by way of a SPAC IPO last December with a promise of 47% annual revenue growth ($191 million) in its first full year as a public company, reported earnings and gave new guidance last week. The results were mixed. On the one hand, the company "missed" on earnings, reporting a $0.17 per share loss where Wall Street had predicted only a $0.15 per share loss. On the other hand, Planet "beat" revenue expectations, collecting $40.1 million in the quarter.

But it was the third hand that may matter most: According to Planet, the way things are shaping up this year makes it all but certain Planet will not hit $191 million in revenue this year.

Q1 by the numbers

Planet Labs grew its revenue 25% year-over-year in fiscal Q1 2023. (That's not a typo. Planet's fiscal calendar is nearly a year ahead of everyone else's.) That would have been great news, except for the fact that the company's losses grew more than 50%.

Input costs to build new satellites only kept pace with sales growth -- up about 24% -- so that wasn't the problem. Instead, losses outgrew sales because Planet Labs is ramping up both its research and development spending and its marketing efforts as it seeks new customers for its satellite imagery. Both R&D, and selling, general, and administrative spending more than doubled in the first quarter.

The marketing spending does seem to be paying off, with Planet Labs adding roughly 30 new customers in each of the past two quarters, and recently passing the 800 customer mark. 

That being said, the fact remains: Barely six months ago Planet Labs management was telling us that it expected to do $191 million in sales in fiscal 2023. Now that the year has begun, however, management has updated its revenue guidance to a range of from $177 million to $187 million. At the midpoint, that's about 5% less revenue than initially expected -- and the entirety of the guidance range falls short of what Planet predicted pre-IPO, showing that Planet Labs isn't growing quite as quickly as it had hoped.

The bull case for investors

That may sound like bad news, but here's the thing: Even if Planet Labs was a bit over-optimistic about its prospects pre-IPO, the larger story remains the same. Planet Labs is still growing quickly -- and its growth rate is still accelerating, not slowing down.

In fiscal 2022, Planet Labs grew its sales 16% year-over-year, surpassing its pre-IPO target of $130 million in sales for that year. (Sales ended up at $131 million.) Then, in fiscal Q1 2023, sales growth accelerated to 23% year-over-year. And in Q2 that growth rate accelerated again, this time to 26%.

While Planet Labs' latest guidance shows that it's no longer targeting 46% year-over-year growth through the end of fiscal 2023 (that's what $191 million in sales would have worked out to), the new target of $182 million-ish sales would still make for a very respectable 39% revenue growth rate for the full year. And in guiding toward it, Planet Labs has confirmed that it expects its sales growth to not just continue, but continue accelerating all year long.

What Planet Labs needs to do now

For long-term investors in the company, that's a positive sign. Now here are a couple other signs you should be looking for if you're considering investing money in this company: 

Pre-IPO, Planet Labs stated a goal of doubling its gross profit margins from 37% (in 2022) to 74% (in 2026). The 41% gross margin recorded in Q1 shows Planet is on the right track, but still moving slowly. If revenue doesn't scale as quickly as planned, that might slow down profit margins expansion as well -- but still, faster expansion of the gross profit margin would be a good sign to look out for.

Pre-IPO, Planet Labs also stated that it expected to turn free cash flow positive by 2024 -- but analysts polled by S&P Global Market Intelligence don't foresee positive FCF before 2026. If Planet Labs hits its target, and begins producing real cash profit closer to its own timeline than to Wall Street's, not only would this be an absolute good thing (profits are always a good thing). It would also surprise the Street.

With Planet Labs stock still down more than 50% from where it was before its SPAC brought it public, springing that surprise would, I suspect, be the best way to heal Planet's ailing stock price.