Planet Labs won a big NASA contract. (Hooray!) But it’s not big enough to move the needle for Planet Labs stock. (Boo!)
Planet Labs (PL 7.58%) stock rocketed 7.6% through 10:25 a.m. ET Monday.
The small-cap space stock announced this morning that it has been “selected” to participate in NASA’s “Commercial SmallSat Data Acquisition Program (CSDA) On-Ramp1 Multiple Award contract” to “provide commercial data in support of the agency’s Earth science research” in a contract worth up to $476 million.
What NASA wants from Planet Labs
Basically, NASA has hired Planet to work as a photographer. That’s good news, but before you get too excited, here are some details.
First and foremost, not all the money will be awarded at once, but rather spread over four years. The contract runs through November 2028, so annually, it looks more like a $100 million contract than a $500 million contract.
Plus, Planet probably won’t get all of the $476 million for itself. This number is actually a ceiling value on the indefinite delivery, indefinite quantity government contract, which might not be awarded in full, and which will be divided with other space companies. As NASA explained Friday, eight different space companies will share in the award. In addition to Planet, these are BlackSky, Satellogic, Teledyne (TDY 1.95%), Iceye, Pixxel Space, The Tomorrow Companies, and Canada’s MDA.
Still, as the owner of the world’s biggest constellation of Earth observation satellites, Planet Labs will probably get at least some of this money. For a company that grew sales only 14% last quarter, that’s good news.
Is Planet Labs stock a buy?
I’m just not sure it’s good enough news to make Planet Labs stock a buy. $476 million divided by four divided by eight means that, on average, each company involved in CSDA can expect perhaps a $15 million yearly revenue boost.
That’s not insignificant — it’s about 6% of Planet’s annual revenue. But it’s probably not enough to move the needle on Planet Labs stock or change the fact that Planet Labs will remain unprofitable and continue burning cash through the entire length of this contract.
Rich Smith has positions in Planet Labs Pbc. The Motley Fool recommends Teledyne Technologies. The Motley Fool has a disclosure policy.
