Artificial intelligence (AI) was a popular sector in 2024, but not all hot stocks were in that field. One tech company operating in outer space saw its share price rise more than 90% over the past year through Jan. 22.
That company is Planet Labs (PL 1.43%), which delivers satellite data about the Earth to businesses and governments. Given its strong share price performance over the last year, Planet Labs could be a great stock to own in 2025.
But shares hit a 52-week high of $4.99 in December and remain close to that at the time of this writing. So, does it make sense to buy now? Let's dig into the company to understand if it's a worthwhile long-term investment.
NYSE: PL
Key Data Points
A look at Planet Labs' business
Planet Labs claims to possess the largest fleet of orbiting satellites in history, about 200 of them. It uses this fleet to deliver "the highest frequency satellite data commercially available," according to the company.
It then sells licenses to organizations for access to this information. The data provides all kinds of insights about the Earth, such as the impact of deforestation and climate change.
For example, the company's data supports disaster management for natural disasters, oil spills, and methane leaks. It's used in agriculture to perform crop monitoring and harvest planning, and it adds to government defense and intelligence data.
Planet Labs' competitive differentiation lies in its ability to collect satellite data around the globe in close to real time, and this information is easy to interpret and use. In contrast, legacy satellite companies provide data that's months out of date and is so complex, it requires specially trained technicians to understand it.
Planet Labs' financial performance
As a result of its technology, management acquired customers such as NASA, the U.S. Department of Defense, and the German space agency. This helped it to achieve record revenue of $61.3 million in its fiscal third quarter, ended Oct. 31, an 11% year-over-year increase.
And although launching and maintaining satellites isn't cheap, Planet Labs reduced its third-quarter costs year over year, allowing it to reach a record gross margin of 61%, a dramatic step up from the previous fiscal year's 47%. The company expects its gross margin to improve further to at least 63% in the fourth quarter.
The company ended the third quarter with a strong balance sheet. Its assets totaled $630.8 million, with $140 million in cash and equivalents. Total liabilities were $166.2 million with no debt, and of that, $77.7 million was deferred revenue. Deferred revenue represents advance payments from customers, and can be reclassified as sales once services are rendered.
But despite rising revenue and lower costs, the satellite data provider is not profitable. It ended the third quarter with a net loss of $20.1 million. This isn't necessarily a concern. Fast-growing tech firms often prioritize business expansion over profits. Moreover, Planet Labs is showing progress toward becoming profitable. Its $20.1 million loss was a drop from the previous year's net loss of $38 million.
In fact, Planet Labs anticipates achieving adjusted profitability on the basis of earnings before interest, taxes, depreciation, and amortization (EBITDA) in the fourth quarter. Its adjusted EBITDA has improved for six straight quarters, with the third quarter loss totaling $200,000. One of the company's goals when it went public in 2021 was to achieve adjusted EBITDA profitability by early 2025.
Management is taking steps to maintain revenue growth. It's using AI to help customers obtain value from Planet Labs data as quickly as possible, which improves customer retention. It's also looking at new industries, such as the energy sector, to grow its clientele.
The company expects sales to reach at least $61 million in the fourth quarter, up from the prior year's $58.9 million. If it hits its fourth-quarter target, that would bring 2025 fiscal year revenue to $244 million, a double-digit increase from fiscal 2024's $221 million.
To buy or not to buy Planet Labs
Planet Labs' solid revenue growth, declining losses, and excellent balance sheet indicate it's on track to building a successful long-term business. These factors make its stock worth at least a spot on your watch list for 2025.
But should you pull the trigger and buy shares now? The answer isn't straightforward. The company's success, coupled with President Trump's interest in expanding the U.S. government's involvement in space, has kept shares near a 52-week high.
To help you with a decision, here's a look at the stock's price-to-sales (P/S) ratio, which measures how much investors are willing to pay for every dollar of revenue. This is a commonly used metric to assess stock valuation for companies lacking profits.
Data by YCharts.
Planet Labs' P/S multiple is elevated right now, but not at the excessive levels seen in earlier years when the stock was overpriced. However, it's not a bargain, either. As a result, it's a good idea to wait -- at least until the share price drops or the fourth-quarter results are be released -- before deciding whether to buy this outer space tech stock.
