Why Planet Labs Stock Got Destroyed Today

What happened

Shares of Planet Labs (NYSE:PL), a space company that operates the world's largest constellation of Earth observation "spy" satellites, saw its stock price crash to Earth on Friday -- down 26.8% as of 2 p.m. ET after reporting mixed results for its fiscal Q1 2024.

Analysts had forecast that Planet Labs would lose $0.15 per share on $52.9 million in Q1 revenue. Planet missed that sales forecast by a whisker, turning in sales of $52.7 million. Planet did beat on earnings, however, reporting a loss of only $0.13 per share.

So what

While falling short of expectations, Planet's sales still rose 31% year over year, and management noted that gross profit margins on those sales expanded to 53% -- a 12-percentage point improvement. CFO Ashley Johnson called the results "solid," while noting that the "macro environment" for space start-ups remains challenging.

Challenging indeed.

Two years ago, as Planet Labs was gearing up to take its stock public in a SPAC IPO, an optimistic management was forecasting revenue growth rates of anywhere from 47% to 55% in Planet's first few years as a public company. Last year, management came close to living up to the hype, with sales growing 46% for the year. At the end of last year, however, management warned that Q1 2024 sales would grow only 31% (which they just did), while full-year fiscal 2024 sales would grow only 35% (and so far, they're not hitting that mark).

Now what

And now, here's the worst news of all: Updating guidance last night, Planet told investors that Q2 revenue will be only $53 million to $54 million -- representing 11% year-over-year growth and almost zero sequential growth. And full-year revenues are now projected at $225 million to $235 million.

Taken at the midpoint, that works out to only 20% revenue growth this year -- much worse than Planet was forecasting as recently as April -- and less than half the growth rate management was promising pre-IPO.

Long story short, it really does look like Planet Labs overpromised when hyping its IPO two years ago. Now it's underdelivering. Investors are not pleased -- and I don't blame them one bit.

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Rich Smith has positions in Planet Labs Pbc. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.