Why Planet Labs PBC Stock Exploded Today

What happened

Recently IPOed Earth Imaging Satellite Company Planet Labs PBC (PL) made its first earnings report as a state-owned company last night – and it was sort of a disaster.

As of 11:30 a.m. ET, Planet shares are down 18.5%.

Image source: Getty Images.

So what

So how bad was the news exactly? For the third quarter of fiscal 2022, Planet reported a record quarterly revenue of $ 31.7 million, up 16% year-on-year, with 94% of its revenue coming from recurring revenue streams ( compared to 93% a year ago) and a growth in the number of customers of 32%.

Gross profit margins climbed 7 percentage points to 34%, and “non-GAAP” (ie pro forma) gross margins were 35%. Still, Planet lost $ 41.5 million in the quarter, 31% more than the revenue it collected.

Finally, Planet prompted investors to expect that in the fourth quarter it would report sales of between $ 35 million and $ 37 million and pro forma gross profit margins of 37% to 39%.

Now what

Investors were clearly disappointed with Planet’s numbers, but should they have been? Let’s look at them in the context of the predictions the company made – before the IPO – for its future growth path.

At the last report, Planet predicted that it would end fiscal 2022 (that is, this year – calendar year 2021) with sales of $ 130 million and gross profit margins of around 40%. Assuming the fourth quarter goes as Planet is now saying, revenue for this year will range from $ 129 million to $ 131 million and have a pro forma gross profit margin of around 37%.

In other words, Planet Labs appears to be on track to achieve the revenue growth promised before the IPO. However, its gross profit margin on these revenues appears to be below expectations. Granted, as far as we know, management still sticks to its prediction that gross profit margins will double to roughly 74% over the next five years, and if it hits that target, I suspect that l ‘action will work fine.

At the moment, however, Planet is lagging behind in the profitability department – and that’s why its inventory is so low today.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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