Why Planet Labs Soared Today

Key Points

• Planet Labs shares rose after announcing a major multiyear satellite imaging deal with the German government.

• The 240 million euro agreement expands Planet Labs’ role in European defense and security, building on recent contracts with U.S. agencies.

• The company occupies a unique niche with high growth potential, but investors should be aware of risks such as possible share dilution.

Shares of Planet Labs (NYSE: PL) climbed on Thursday, closing up 11.2% as of the 1 p.m. ET early market close for the Fourth of July holiday. The rise comes as the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) gained 0.8% and 1%, respectively.

Planet Labs, a satellite imaging company, signed a major deal earlier this week that is continuing to boost shares.

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Planet Labs inks major deal

The company announced on Tuesday that it has signed a deal with the German government to provide satellite imagery and geospatial data "in support of European peace and security." The multiyear, 240 million euro agreement also includes artificial intelligence (AI)-powered intelligence from the imagery and data Planet Labs provides.

The deal marks a major step in the company's push into Europe and defense and security-related applications. In a statement, Will Marshall, CEO and co-founder of Planet Labs, said of the deal, "With the changing geopolitical landscape, the demand for sovereign access to geospatial intelligence is more urgent than ever before, and Planet's satellite services model is uniquely designed to enable large area security monitoring."

Image source: Getty Images.

This could be the first of many such deals, as countries across Europe commit to increasing defense spending after last month's NATO summit.

Although the contracts are smaller in scope, this month saw the company announce several other significant contracts with the U.S. Department of Defense and the U.S. Navy.

Planet Labs is growing

Although the stock is not cheap and investors should be aware of possible dilution as the company raises money to fund growth, I think Planet Labs is a good pick for those with a high risk tolerance. The company operates in a unique niche that has a lot of potential.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.