The space stock has grown on the strength of both publicity and content. Pacific Coast Trail (cough, $ASTScough). It’s hard to deny the huge potential of many so-called “newspace” stocks that shoot things into space for any purpose – from datacenters to asteroid mining. As a result of this blind race, there are now more than 15,000 satellites orbiting the Earth and 300 rocket launches every year. And with SpaceX reportedly planning to hit the market at a $1.5 trillion valuation, space stocks are expected to get even more attention. Only a few of these names sound attractive to us and one of them is Planet Labs $PL.
Planet Labs Stock Moons
For more than seven years now we have been tracking Planet Labs, the leader in geospatial intelligence. The business model involves using satellites to take pictures of the Earth to monitor anything from weather patterns to troop movements to city planning. Our last check-in with the company left us astonished. On one hand, their revenue growth was accelerating thanks to a big contract with a major satellite operator and a shiny, new partnership with Anthropic. The company also achieved positive adjusted EBITDA in its first quarter, which is a fancy accounting term that basically says “Here’s how much money we could have made if we didn’t have to pay for certain things.”
Planet, on the other hand, was still burning cash while consistently missing its own guidance. As a result, that poor execution came with a reasonable assessment – ​​A. Simple Valuation Ratio (SVR) Only 5’s. Fast forward a year and just over a year later things have changed dramatically +500% Share price rise vs. +25% Run on Nasdaq. This is what happens when stock prices fall but the fundamentals do not change.
When you see similar valuation spikes across the board for space stocks, it’s a classic example of thematic hype. Certainly, like death and taxes, one of two things will happen. Either the company’s fundamentals will improve rapidly in revenue growth and profitability metrics, or the share price will crash into the ground.
Defense and boost from AI
The value of a stock doesn’t increase 500% in a year for no reason. One contributing factor is the hype we’re seeing in all the space stocks like Rocket Lab $rklb with a simple valuation ratio of 57, or AST Spacemobile with an SVR of 166. But there are also some planet-specific stories that are fueling the hype: mass defense and AI. In the past year, Planet secured three satellite service contracts worth almost half a billion dollars, as well as another “nine-figure deal” with the Swedish Armed Forces. While geopolitical uncertainty is never a good thing, Planet is making hay while the sun shines and taking advantage of countries’ needs for additional security. Want to keep an eye out to make sure your global enemies aren’t attacking? Geospatial intelligence can help.
As far as AI goes, the company is promoting its new “Planet Analytic Feeds” that use machine learning and computer vision to do things like detect and label earthly objects from space. It can also identify environmental anomalies that may be useful to manufacturing or government entities that wish to avoid damaging the ecosystem with their operations. Each of Planet’s Pelican satellites is equipped with NVIDIA chips for “edge” computing, meaning all the number crunching is done in space rather than in a data center somewhere. That’s great and all, but does it translate into growth? Yes it does.
Planet recently released their 2025 year-end results and achieved growth of 26%, which handily beat their guidance of 22%. Looking ahead, the planet’s midpoint of 2026 (fiscal year 2027) Revenue guidance points to 39% growth – a dramatic upside. The net retention rate has increased from 103% last summer to 116% recently indicating that existing customers are spending more. “Defense and intelligence” now make up more than half of their revenues, although we would prefer commercial revenues to dominate (They currently represent only 18% of total revenue). The former may be heavily affected by government administration changes while the latter should be more stable.
When analyzing their revenues on a quarterly basis, we see good natural stability and a clear growth trend over the last year. This can be attributed to 87% of their annual contract value being annual or multi-year contracts, with an average duration of about two years.
The forward-looking valuation makes Planet less overvalued, but still a higher bet. With a market cap of approximately $11 billion, and our estimated fiscal 2027 Q4 revenues of $480 million annualized, this is an SVR of approximately 23 which is well above our catalog average of approximately seven. That premium valuation reflects the strong growth prospects and massive hype we’re seeing in almost all space stocks. With their stock being excellently priced, any disappointment will be severely punished.
Revenue growth is always the ground truth when it comes to disruption, and it’s clear that Planet is indeed a disruptor. The earnings deck reiterated the same drivers they talked about earlier – large government sales opportunities, AI-enabled solutions, and more satellites being launched after the successful launch of 40 satellites last year. (AST Spacemobile, take notes here.) The best part is that they’re investing even more in their satellite constellation over the next year, and the funding for it will come from positive operating cash flow.
making cash flow positive
Planet generates positive free cash flow in 2025, assuaging our cash-burn fears. The company now has cash reserves of more than $640 million and no long-term debt other than $400 million of convertible notes due 2030. However, Planet can probably cover this with the cash generated from its operations. They could alternatively convert the notes into equity, which would dilute existing shareholders, but may be better off if the shares continue to trade at high multiples.
Planet expects capital expenditures of $80-$95 million this year reflecting greater investment in next-generation satellites, and they talk about building satellites that cater to particular customers. Perhaps this is what is driving all the potential for future revenue growth. They are now building satellites which will soon result in recurring revenues over time.
Our original attraction to Planet was that they were a high-margin software business, but it also looks like they’re moving toward custom hardware configurations. Provided they can maintain those margins around the 60% level, we’re happy either way.
On an annual basis, the Company expects to operate its business in a free cash flow positive manner through contracts that require customers to make upfront milestone payments that offset required capital expenditures. Strong demand is said to be coming from Europe where many sovereign states are considering deploying their own satellites to deal with all the geopolitical instability we are seeing. This is a good reminder not to get too carried away with the hype. Although there are plenty of flashy press releases being put out about partnerships with Google, NVIDIA, and Anthropic, that’s not paying the bills right now. In fact, AI may even pose a threat.
in the latest earnings callPlanet talked about how their full-stack geospatial imagery platform could be disrupted by AI, when “anybody can come in, build their own custom application of equivalent fidelity in a short amount of time.” Management wants us to think of this as an opportunity – an expansion of the total addressable market that is being unlocked – but it’s also a potential step towards greater data commoditization. If everyone can quickly create their own custom analytical platforms, Planet only gets paid for their images, not for additional value added. That’s why leaning into AI and partnering with leading technology providers will perhaps provide ways to turn any potential AI headwinds into tailwinds.
conclusion
Space stocks appear largely overvalued due to excitement over emerging topics like data centers in space, satellite-powered direct-to-sale broadband networks, and of course the exciting SpaceX IPO expected this year. Since their SPAC debut, Planet’s value proposition has been evolving. They are now emerging as more of a play on defense than commercial. We are pleased to see strong growth momentum after growth stalled several years ago. Since our thesis has not changed and growth continues, there is nothing more to do than wait a year and recheck to ensure that growth continues in FY2028.
