Once upon a time, I had high hopes for Planet Labs (PL 1.36%) stock. Today, I'm not so sure.

Two years ago, as special purpose acquisition company (SPAC) sponsor dMY Technology Group prepared to bring Planet Labs public in an initial public offering (IPO), I had the opportunity to interview the company's CEO and get an idea of what Planet Labs had planned for its immediate future. The plans were ... aggressive -- and encouraging.

With nearly 200 Earth observation satellites in orbit, Planet Labs already owned the world's biggest constellation of private "spy" satellites. They were keeping watch over everything from wildfires in California to troop movements on the Ukrainian border to a certain Taiwanese container ship that famously got itself stuck in Egypt's Suez Canal a few years back. 

The company may not have been the fastest growth stock on the planet (posting 18% sales growth in fiscal 2021, for example), but it hoped to put its IPO proceeds to work and grow sales:

  • 47% in fiscal 2023
  • 51% in fiscal 2024
  • 55% in fiscal 2025

This is all before leveling out at 54% growth in fiscal 2026.

The company also planned to expand the profit margin earned on that revenue -- from 40% gross margin in fiscal 2022 to as much as 74% in fiscal 2026. Midway through this period -- or right about now -- Planet Labs also thought it would be able to turn free-cash-flow positive.

But very little has turned out as planned.

Planet Labs by the numbers

Take revenue, for example. In Planet Labs' fiscal Q1 2024 earnings report, which was released last week, management reported that sales grew only 31% year over year. Granted, that was in line with management's forecasts given in April, but it was far short of the 51% fiscal 2024 growth that Planet Labs had been talking about back in 2021.  

Even worse, Planet Labs cited a "challenging macro environment" in warning that full-year revenue growth would be not 51% or even the 35% it had predicted in April -- but only 20%. And almost as if it wished to emphasize how quickly the business is deteriorating, management forecast that fiscal Q2 sales will grow only 11% year over year.

No wonder Planet Labs closed 30% lower on Friday after reporting earnings.

Yes, Planet Labs is still seeing some growth. Yes, that's a whole lot better than seeing sales decline. And yes, even if sales aren't measuring up to past promises, the company is at least still making progress on the profits front. GAAP losses in fiscal Q1 ($0.13 per share) were less than expected ($0.15 per share). And Planet Lab's gross profit margins have climbed to 53%.

Progress is being made. It's just coming a whole lot slower than expected.

What investors should do now?

There is a silver lining -- of sorts -- behind all these grey clouds. If Planet Labs isn't turning out to be quite the fabulous growth story we were led to expect two years ago, at least its stock no longer costs as much as it did back then.

From a share price of roughly $10 around the time of the IPO, Planet Labs stock has now lost roughly 66% of its value, closing Friday at just $3.41 a stub. That's pretty lousy news for early investors in the company (such as yours truly). It does mean, however, that at a current market capitalization of $941 million, Planet Labs stock now trades for only 4.6x trailing sales.

(Is that a lot or a little? Here's a deeper look at current valuations of space SPACs.)

Also noteworthy: According to data from S&P Global Market Intelligence, if you net out Planet Labs' cash and debt, the company's enterprise value drops to just $591 million -- less than 3x trailing-12-month sales.

Granted, that's not as cheap as some space stocks are selling for. Granted, too, Planet Labs has a $112 million-a-year cash burn rate, so its cash reserves are dwindling and its enterprise value-to-sales ratio will inch gradually closer to its price-to-sales ratio over time.

Still, 3x sales isn't necessarily too high a price to pay for a space stock. Indeed, several companies recently have made acquisitions in the space industry at similar valuations.

While Planet Labs stock no longer looks like the hypergrowth story that I once believed it would be, at least its share price is now more appropriately valued for slower growth. The stock remains a speculative bet, and investors should be cautious about putting too much money into it. However, it might be worth a small bet, just in case management figures out a way to make its promises come true.