Call me a wild optimist, but I think Planet Labs (PL 2.08%) might be the best space stock to buy today.
This may sound strange to hear. Just a couple of years ago, I was one of Planet Labs' biggest critics, faulting the company for promising big things in the run-up to its 2021 initial public offering (IPO) -- and then failing to live up to its promises.
In my defense, I had good reason. Prior to its IPO, Planet Labs portrayed itself as an extraordinary growth stock. But promised sales growth rates of 50% and up, and gross margin rates in excess of 70%, were by 2023 coming in closer to 20% and 50%, respectively. Planet wasn't growing nearly as fast as it had hoped, nor generating nearly the profits it promised.
But then, a miracle happened.
Image source: Getty Images.
2025: The year Planet Labs grew up
It all started last January, when Planet Labs announced its biggest contract ever, a seven-year, $230 million deal "to expand its partnership with a long-standing, Asia-Pacific commercial partner [to] build and deliver a constellation of new Pelican high resolution satellites, securing certain capacity on the satellites for the partner."
The partner was later identified as Japan's SKY Perfect JSAT, a broadband internet provider and TV broadcaster that sought to expand into "space-based intelligence services." More important than the identity of the customer, though, was what the contract meant for Plant Labs financially:
- The upfront payment for services to be provided in the future funded Planet's construction and launch of 32 Pelicans.
- It added $33 million to the company's annual revenue stream.
- And it immediately flipped Planet Labs from burning cash to free-cash-flow-positive.
Planet Labs stock today
This last point was reinforced last month, when Planet Labs reported its financial results for the fiscal 2026 third quarter.
Planet Labs grew its revenue by 33% year over year (still not 50%, but a notable improvement). The company also tripled its backlog of orders to be fulfilled, foreshadowing stronger sales growth ahead. Best of all, Planet Labs broke even on a generally accepted accounting principles (GAAP) basis, and reported its third straight quarter of positive free cash flow -- indeed, its third quarter of positive FCF ever.
Year to date, Planet Labs has generated $55.2 million in positive free cash flow, giving it a run rate of $73.6 million for the year if things stay on track. And if that happens, Planet Labs is on course to deliver an astoundingly good earnings beat when it reports its Q4 numbers in a couple of months.
According to data from S&P Global Market Intelligence, most analysts who follow the stock expect Planet Labs to report free cash flow of only $24 million.
What this means for investors
Can Planet Labs hit that forecast? I think so. Capital spending so far this year is only $55.1 million (or $59.7 million, if you count capitalized software costs). Run rate that into Q4, and capital spending should land below $80 million for the year, even with all the new satellites built and launched. And operating cash flow for the first three quarters is already nearly $114 million.
If Planet Labs doesn't generate a single dollar of new cash flow in Q4, it should still beat analyst forecasts by more than $10 million. If it generates cash flow anything like it's been doing in the first few quarters this year, it should beat by a lot more than that.
NYSE: PL
Key Data Points
Planet Labs stock is a buy
Admittedly, Planet Labs stock is not inexpensive.
Planet Labs' turnaround has not gone unnoticed, and the company's market capitalization more than quadrupled in 2025. Valued at $6.5 billion today, Planet Labs stock costs 88 times my best guess at this year's free cash flow.
That seems expensive. Then again, many stocks appear similarly expensive at the point when they transition from negative to positive free cash flow. Whether the valuation is fair will depend largely on how quickly Planet Labs can grow a free cash flow number that is finally positive.
For the time being, all we can hope is that Planet Labs continues to do what it's doing -- because the good news is that what Planet Labs has been doing has done wonderful things for the stock price.
