Editor’s Note: Anthony Summers, our Director of Trading, previously showcased the prowess of his Value Meter system. However, his latest prediction really stands out.
Back in early October, while speaking at The Oxford Club’s Private Wealth Seminar in Massachusetts, Anthony highlighted a particular stock using The Value Meter. The stock in question, from financial tech firm Dave (Nasdaq: DAVE), had a stellar Value Meter score of 1.15, signaling it was approaching “extremely undervalued” status.
Fast forward a bit, and Dave’s stock skyrocketed by 150%. Quite the achievement! Hats off to Anthony for his spot-on predictions and congratulations to the Wealthy Retirement readers who acted on his insights.
The space sector has been capturing investors’ imaginations, and Planet Labs (NYSE: PL) is riding this wave of excitement. Known for operating the largest Earth-imaging satellite fleet globally, Planet Labs saw its stock soar from under $2 in September to over $6 recently. This surge comes as more investors become captivated by the increasing need for satellite data.
Why the buzz? Planet Labs boasts a network of over 200 satellites that takes daily photos of every part of the Earth’s surface. These images are vital for government bodies, agricultural firms, and environmental watchdogs. Imagine a real-time Google Earth, but tailored for detailed applications like crop monitoring, climate tracking, and defense.
Recent financial results highlight the company’s upward trajectory. Third-quarter revenues hit a new peak at $61.3 million, marking an 11% year-over-year boost. Gross margins also improved, rising to 61% from last year’s 47%. Their client roster expanded by 4% to 1,015, with a solid 97% of contracts ensuring recurring yearly revenue.
Planet Labs also made strides toward profitability. Their management remains optimistic about achieving a positive adjusted EBITDA in the next quarter. Meanwhile, contract wins are plentiful. They recently secured a close-to-$20 million agreement with NASA and multiple pacts with the U.S. Department of Defense and international governments like Brazil and Germany.
Their newest satellite, Pelican-2, featuring Nvidia’s cutting-edge Jetson platform, is prepped for launch. Another new satellite, Tanager, is unlocking thrilling commercial avenues in environmental observation.
But this is where The Value Meter helps us stay grounded.
Despite the enthusiasm, the stock seems somewhat affordable with its enterprise value-to-net asset value (EV/NAV) ratio at 3.46 compared to the industry’s average of 7.89. Nonetheless, there’s a wrinkle. Planet Labs has a history of burning through cash, with free cash flow at about -2.82% of its net assets in the past year. Although this is better than the -18.76% average for comparable companies in the red, it indicates Planet Labs needs considerable growth to validate its current valuation. With $242 million in cash, they have some runway, yet achieving sustainable profitability remains a challenge.
Even with reduced operating losses, shrinking the adjusted EBITDA deficit to $0.2 million from $12 million the prior year, the company isn’t yet profitable.
Though Planet Labs shines with its groundbreaking tech and market potential, the present stock valuation seems overly optimistic. Investors may be factoring in perfect execution of their growth plans while downplaying short-term profitability hurdles.
The Value Meter currently rates Planet Labs as “Slightly Overvalued.”
If there’s a stock you’re curious about for a future edition of The Value Meter, drop me a line.
