We came across a bullish thesis on Planet Labs PBC (PL) on Substack by Unconventional Value. In this article, we will summarize the bulls’ thesis on PL. Planet Labs PBC (PL)’s share was trading at $6.19 as of Feb 11th.
A satellite in orbit, capturing the technological prowess of the aerospace & defense company.
Planet is a significant early-stage player in the satellite imagery industry, offering a unique value proposition with its proprietary data collected from the largest satellite network in the world. The company’s distinguishing feature is its ability to provide a daily scan of the Earth, a capability that sets it apart from competitors and fuels its long-term growth potential. While government agencies, particularly in defense, dominate industry spending and drive near-term growth, the company’s long-term strength lies in its live Earth database, which presents compounding value for government and commercial customers alike. This database has numerous use cases across various industries, but scaling the business has been challenging due to extended sales cycles and the need for specialized geospatial expertise to turn the raw data into valuable insights.
To overcome these challenges and accelerate growth, Planet is focusing on three key areas: developing downstream data products to reduce the need for specialized knowledge, building a platform to integrate various datasets and provide real-time analytics, and expanding its sales force. These investments are reflected in the company’s income statement and aim to position Planet for durable growth while improving operating leverage over time. The company’s data acquisition infrastructure is also evolving, with the introduction of new satellites and sensors that open up new markets and upsell opportunities, further enhancing product offerings and customer value.
Planet benefits from the fixed costs of data acquisition, which create a natural economic advantage as its gross margins expand. Over time, the company’s investments in product and platform development should improve its customer lifetime value and reduce customer acquisition costs. Moving up the stack by selling software atop the data offers customers greater value and creates new expansion opportunities at a lower cost. The company is also seeing exponential improvements in satellite performance, as newer satellites, such as SuperDoves and Pelicans, offer significantly better capabilities at lower costs, providing additional leverage for growth.
Despite the company’s current losses, the large investments it is making to accelerate market growth are positioning Planet for long-term success. Its business model, which offers a unique and scalable value proposition, is well-suited to capitalize on the growing satellite data market. The balance sheet provides the flexibility to sustain these investments, with the company maintaining a strong cash position and a commitment to reaching free cash flow breakeven while retaining substantial cash reserves.
Planet’s competitive landscape is unique, as its daily scan product remains a virtual monopoly. While other players may attempt to enter the market, they cannot replicate Planet’s archive or the ongoing technical improvements that set it apart. The company’s long-term opportunity lies in the fusion of satellite data with other datasets to deliver scalable solutions across vertical industries, and its strategy focuses on enabling partners to build on its platform. Despite the current concentration of spending in defense and intelligence, the commercial market is expected to grow as satellite data and AI continue to advance. Planet’s potential is based on the expansion of the satellite data market as a whole, and with its platform and data assets, it is well-positioned to capture significant growth in the years to come.
Planet Labs PBC (PL) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 8 hedge fund portfolios held PL at the end of the third quarter which was 12 in the previous quarter. While we acknowledge the risk and potential of PL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.