Decoding Planet Labs Potential In Earth Observation Despite Macro Headwinds: Analyst Insights

Needham analyst Ryan Koontz reiterated a Buy rating on the shares of Planet Labs PBC PL with a price target of $8.

Planet Labs posted a solid 1Q24 but saw a growing macro headwind impact bookings and reduced its F2Q and F24 outlook, said the analyst.

Revenue of $52.7 million (+31% y/y) and was in line with the $52.9 million consensus, driven primarily by strength in the Defense and Intelligence segment, added the analyst.

At the end of the quarter, customer growth was 9% Y/Y, reflecting a slowing growth as PL prioritizes expansion in larger customers.

The analyst said new bookings reflected elongating sales cycles and lower usage due to macro caution across commercial and civil government. In the analyst’s view, by democratizing access to and increasing ease of consumption of geospatial data, PL is expanding existing vertical markets and unlocking new ones.

PL is the only company, the analyst noted, with a daily scan of the entire Earth, a ~5-year lead over its nearest competitor, as well as an archive of >1,700 images for every point on Earth that cannot be replicated and plays a pivotal role in training ML models.

The analyst expects accelerating top-line growth in F23/24 as PL ramps up investment in S&M and software development.

Despite the near-term headwinds, the analyst sees PL as the emerging leader in global earth observation.

Price Action: PL shares are trading lower by 27.9% at $3.52 on the last check Friday.