Planet Labs Stock Plunged Following Its Recent Earnings Call. Should Investors Buy the Dip?

Space stocks person been a blistery topic, and Planet Labs (NYSE: PL) is 1 institution successful the manufacture that has surged 474% implicit the past year. The banal reached $51 per stock successful precocious May but has since declined by 40%, including a 26% one-day driblet the time aft its June 4 net announcement.

Here's what has been driving Planet Labs' banal little and whether investors should bargain the dip successful the abstraction stock.

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Planet Labs' increasing defence concern

Planet Labs operates a constellation of satellites that instrumentality images of satellite Earth aggregate times a day. It provides this imagery, on with spatial analytics and software, to authorities and endeavor customers daily, enabling them to show biology changes, enactment defence operations, oregon optimize harvest yields.

Over time, Planet Labs has evolved from an open-data start-up to a cardinal contractor for defence and quality agencies, opening itself up to much lucrative authorities contracts. Its gross has grown acknowledgment to deals with authorities agencies specified arsenic the National Geospatial-Intelligence Agency, NASA, and NOAA. Earlier this year, the institution was selected arsenic a premier contractor nether the $151 cardinal SHIELD IDIQ declaration by the Missile Defense Agency.

A nett nonaccomplishment and equity offering weighed connected the abstraction banal

In Planet Labs' archetypal quarter, the institution generated stellar earnings, with grounds gross of $94.2 million, up 42% twelvemonth implicit year, driven by beardown request from planetary defence and quality customers. However, it besides posted a nett nonaccomplishment of $138.9 million, mostly owed to a non-cash revaluation nonaccomplishment of $106.5 cardinal connected warrant liabilities. In the quarter, warrant holders exercised their remaining warrants, generating $107.8 cardinal successful currency for Planet Labs, dragging down its earnings.

In addition, the institution announced a $1.5 cardinal at-the-market (ATM) equity offering program, which triggered the 26% sell-off pursuing its net announcement owed to capitalist fears of dilution. Planet Labs had a marketplace capitalization of $15 cardinal conscionable earlier the announcement, implying up to a 10% dilution if the proceeds are afloat utilized.

Should you bargain the dip connected Planet Labs?

Planet Labs is capitalizing connected the stock's immense run-up implicit the past twelvemonth and volition usage the funds to grow its outer constellation, which could assistance it unafraid further defence contracts. The proceeds could besides assistance money semipermanent exertion investments successful space, including space-based information centers, with which it is moving intimately with Alphabet.