Why Planet Labs Stock Fell This Week
Key Points
Planet Labs is a start-up working on satellite imaging services from space.
The company's backlog is growing rapidly.
Even after this drawdown, the stock trades at a premium price.
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Shares of Planet Labs (NYSE: PL) fell around 10% this week, according to data from S&P Global Market Intelligence. A space economy stock that operates a fleet of satellites for regular imaging services, the company is making huge inroads with new potential contracts for defense, civilian, and corporate use cases. The stock is up 487% in the last 12 months after reporting strong earnings growth and a new partnership with Alphabet for artificial intelligence (AI) data centers.
However, as of 10:00 AM EST on Friday, January 23rd, Planet Labs stock is down 10% this week. Here's why.
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AI data analysis from space
Last quarter's earnings for Planet Labs were fantastic. Revenue grew just 33% year-over-year to $81 million, but its backlog was up a whopping 216% to $734 million. More and more customers -- both defense and corporate -- are turning to Planet Labs for imaging services from space. It even has a new research project with Alphabet to potentially build data centers in orbit.
So why did the stock fall this week? First, we saw momentum break across the board for the market in general over the flare-up around Greenland-focused tariffs. Even though this issue seems to be resolved (for now), many speculative stocks, such as Planet Labs, have fallen from their highs. There was also an insider sale from the CFO of Planet Labs. Ashley Johnson sold $4 million worth of stock, which can be a negative signal to investors after a massive run-up in the price.
Overall, Planet Labs investors are likely worried about the stock's valuation today. It has a market cap of $8.33 billion compared to just $81 million in quarterly revenue, and a price-to-sales ratio (P/S) of 28. This is going to induce volatility in the share price going forward.
Image source: Getty Images.
Time to buy the dip?
Even though the stock dipped this week, Planet Labs is up close to 500% in the last year alone. It has a high P/S ratio and is not profitable. Yes, the company is gaining a ton of new contracts, but that does not mean you should buy in at any price.
Despite the stock's slight decline this week, Planet Labs stock is not a buy at today's level.
Should you buy stock in Planet Labs PBC right now?
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
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