Planet Stock: The Leader in Geospatial Intelligence
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Perhaps you’ve heard the old story about how JFK’s father, Joe Kennedy, decided to get out of the stock market when the shoeshine boy started giving him stock tips. It seems like every market crash has been preceded by a period of mania where investors have been replaced by speculators who will buy just about anything. Pundits encourage this behavior which makes people believe that speculation is the norm. Look no further than this gem from Yahoo Finance:
The way you manage risk in meme stocks is by not dabbling in that garbage. It’s nothing but pure speculation. People talk nonstop about evil billionaires, yet they can’t get in line fast enough to hand hedge fund managers their life savings.
Along with meme stocks, ICOs, and NFTs, special purpose acquisition companies (SPACs) are another way retail investors are being fleeced. We’ve now looked at over 50 SPACs, all of which can be found in our tech stock catalog. Of those, we’re only holding two (soon to be one). That’s because we’re risk-averse tech investors who believe that one of these days the music is going to stop. Still, we do occasionally get tempted. One such temptation is the recently announced merger between Planet and dMY Technology Group, Inc. IV (DMYQ).
About Planet Stock
If you’re not up to speed on what Planet does, check out our piece on how Planet Uses Satellites and AI for Geospatial Intelligence. Simply put, Planet takes pictures of the planet and sells them to people, something referred to as “geospatial intelligence.” After raising nearly $374 million in funding, the company has decided to go public. The planned IPO will raise about $545 million for Planet, enough to cover the $500 million in debt on their books. The resulting glossy SPAC deck is the first we’ve seen that provides historical revenue information which demonstrates strong consistent growth.
Of course, that 27% compound annual growth rate (CAGR) suddenly jumps to 44% when Planet forecasts future revenues. They also do the old “my made up numbers are better than everyone else’s made up numbers” slide which is absolutely useless.
Planet is a Data Company
Planet refers to themselves as a data company that happens to have 200 satellites in operation. One fleet of over 150 satellites images the entire Earth’s landmass every day at three to four-meter (about three to four yards) resolution. Another 21 higher-resolution satellites can image any particular place at 50-centimeter resolution (about 20 inches). With the largest Earth observation fleet of imaging satellites, Planet images the entire land mass of the Earth every day which is appended to a data set that’s 10X larger than all their competitors combined. Machine learning algorithms are then used to identify objects such as roads, buildings, planes, ships, trees, etc. The end result is a searchable database that’s used for any number of use cases.
Some Use Cases
Here are a few examples of how Planet’s data is being used :
- Google uses the data to fill in gaps in their Google Maps product
- Corteva monitors over 800,000 fields for farmers
- Humboldt County uses it to make sure marijuana growers achieve compliance.
- New Mexico State uses it to enforce regulations across 9 million acres
- Norway uses it to track deforestation across the globe
Over 600 customers use Planet’s platform which produces revenue from a variety of segments – 24% from civil government, 23% from agriculture customers, 22% from defense and intelligence, 17% from mapping, and the remaining 14% from a variety of different vertical markets. Around 90% of Planet’s revenues are recurring and 70% represent multi-year contracts. A retention rate of 110% means they’re successfully upselling existing customers over time.
A Huge TAM
With 10 years of data history, Planet has a clear competitive advantage over any new entrants to the geospatial intelligence market. Because they’re an undisputed leader, there’s a huge blue ocean total addressable market (TAM) waiting to be captured. Planet estimates “satellite data services” to be a $19 billion market with an additional $16 billion to be captured in “sustainability transformation,” in other words ESG type stuff. They also add on another $40 billion TAM for “digital transformation” which gives them a total of $75 billion that can be captured.
While those may seem like some aggressive numbers, even a TAM that’s a third of what’s seen above gives Planet plenty of room to run.
To Buy or Not to Buy
We recently wrote about how SPACs are showing signs of wear with some mergers having a possibility of falling through. Don’t even consider buying a SPAC until the merger is complete. Since the Planet merger is expected to finalize in the fourth quarter of this year, we’ll set a reminder to check in with the company once that happens. If you’re someone who can’t get enough risk and you decide to buy anyway, you’re not purchasing something that would be considered overvalued, at least according to our simple valuation ratio. Here’s that calculation for Planet using their fiscal 2021 revenues and implied market cap of $2.7 billion.
- 2.7 / 0.113 = 24
We consider anything above 40 to be too highly valued to consider purchasing, regardless of how great the story is.
Earlier this year we published a piece on Investing in Geospatial Intelligence Stocks in which we looked at a number of other companies dabbling in this space. One of those was Spire Global, a company we purchased shares in. As that deal has yet to be completed (it still trades under the ticker NSH), and we stand to lose money if the deal doesn’t happen, we’re liquidating our position tomorrow. Now that the market leader has emerged, there’s no sense in holding a runner up.
We do have one concern about Planet which is that they’re set up as a “public benefit corporation” which seems to excuse them from their fiduciary responsibilities. Says the Financial Times:
That’s great the founders want to pursue some altruistic mission, but they should do it with their own money. We invest in companies with the single goal of generating profits which we’ll then use to donate to the charities we feel are worthy of our hard-earned capital. This whole “shareholders are no longer our priority” rubbish we’re starting to see is a major concern which we’d put in the same camp as the destruction of shareholder value that D&I initiatives often lead to.
Lastly, another geospatial intelligence company, Satellogic, announced a merger with a SPAC this week, something that’s pointless to cover. When you have an established leader in a particular space, that’s where you place your bets. Satellogic has been in operation for eleven years and this year they’re expected to show their first revenues – an estimated $7 million. We only assume these are their first revenues because they show 2020 revenues at zero without providing any additional information.
Conclusion
There aren’t many good pure-play space stocks out there, so Planet is on our radar as a possible addition to our portfolio. Once the deal is done and dusted, we’ll consider opening a position and accumulating shares over time. Of all the SPACs we’ve seen so far, Planet is one of the best – a quality business that’s established a leadership position in a blue ocean TAM with lots of room for future growth.
Should the merger proceed as planned, the ticker will change from DMYQ to PL.
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I’m wondering if Planet is to some extent a competitor with Australian company Nearmap (NEA.AX) – aerial imagery business ?
Nearmap is trying to expand in USA. Today NEA.AX is +12.85% after very good preliminary results.
Annual revenue growth appears on point with an $800 million market cap (USD).
The way we look at it, you find the market leader in a space where there’s loads of blue ocean TAM, you place your bets, and you keep an eye on the leader to make sure their execution doesn’t falter. If a clear leader hasn’t emerged, that’s when it makes sense to start trying to figure out who that might be. Planet appears to be a clear leader in what they do so the next milestone is for the merger to go through.
That said, we may still look to cover Nearmap, but that’s a low priority at the moment. Thank you for raising that company as that’s the first we’ve heard of them!
Great article. So glad I joined Nanalyze!! I’m curious if they compete with Esri or do they sell to companies like Esri that provide GIS info to utilities and other asset centric industries? Will have to do a little more research on this one!
Really glad to hear your feedback Gavin. We’re very proud of what we’ve built over the years with many exciting things to come. Our subscribers have made this possible, people who pony up the financial support as you have.
Thank you for bringing up Ersi. Indeed we haven’t a clue how these two companies interact or the extent to which they compete with one another. Given Ersi is private we may have a tough time finding that out. We’ll likely do some more pieces on this topic down the road. We’re also getting ready to publish a piece on a new space trust being launched in the U.K. Stay tuned and thanks for the comment!
Only 2 SPACS worth investing in ? How about SRNG Soaring Eagle Acquisition Corp, which is merging with Ginko Bioworks, a leader in synthetic biology.
Just signed up for an annual subscription.
Thank you so much for the financial support Robert! Never hesitate to drop us a note with questions or comments – like this one.
Long story short, we covered 50 SPACs and bought three – Spire Global, Desktop Metal, Ginkgo. We sold Spire for reasons mentioned in this piece, DM because they are overpriced, and we’re going to sell Ginkgo too at tomorrow’s open and buy it back once the deal is done and dusted. That’s because of our new rule – don’t own a SPAC unless the deal is closed because shares could drop like a rock if the deal falls through.
You’re a premium annual subscriber so be sure to download our stock catalog which contains all 50 SPACs. There are some others we like but don’t own – IonQ, SomaLogic, you can use autofilter to see which ones with links to our research.
Thanks again!
Thank you for the nice and more detailed article on Geospatial. Is this the right time to buy DMYQ or wait for the merger to occur before buying?
We recently wrote about why investors should wait for any SPAC merger to be finalized before buying shares: https://nanalyze.com/2021/07/why-popular-spacs-falling-down/
We’re waiting until the deal finalizes and we suggest you should too. This is about minimizing risk, not about speculating on when the share price will be lowest.
When I read about the collaboration of Farmers Edge and Planet (I don’t think I can provide link), it makes perfect sense that these two complimentary services together create value. One company provides the algorithm and the other the image.
As a stand alone product, one could say that respectively the first is nothing but code and the other questionable art, but together there is created a product that companies can optimize decisions based on.
However, I have a hard time understanding how exactly it makes sense for both companies to sell this end product to customers. It seems that a competing product is being sold, and the only thing that sets it apart is the customer segment. Farmers edge sells to farmers in Canada and Planet sells to Farmers Edge competitors such as Bayer, Syngenta and Corteva.
Any thoughts on this?
Good question. The bigger problem we’re seeing here is why Farmers Edge is having growing pains. Why did revenue growth suddenly turn south while shares of the company have plummeted? As part of looking into the Planet deal you’ve mentioned here, we’ll take a look at why Farmers Edge is hitting the skids lately. That article is teed up with our research team now.
October 11, 2017 “Planet And Farmers Edge Redefine Precision Ag With Landmark Agriculture Deal”
“For years, Farmers Edge has been a valued customer and partner, distributing RapidEye and PlanetScope imagery through their precision ag software suite. Today, we’re proud to announce that we’ve strengthened our ties to Farmers Edge, entering into a strategic distribution deal with the leading agricultural insights provider.
Planet and Farmers Edge, together, are bringing insights derived from daily, global imagery to the agriculture industry. The multi-year, multi-million dollar deal names Farmers Edge as a sole distributor of Planet data in select agricultural regions around the globe. This partnership equips Farmers Edge growers with comprehensive, high-quality field imagery more frequently updated than any other company in the industry.
For Planet, this massive deal for our firehose of geospatial data validates our daily monitoring mission and will enable faster market adoption of our proprietary content. Farmers Edge commitment to Planet ensures that our data is brought to market in the form of high quality analytics and information products.
Daily Planet data will be the foundation of the daily field monitoring, in-field analytics, and predictive modeling that Farmers Edge product suite provides. Customers can leverage Planet data to detect of pest and weed pressure, identify drainage issues, assess hail damage, understand herbicide injuries, spot nutrient deficiencies, run yield predictions, and more. ”
at that point the deal “names Farmers Edge as a sole distributor of Planet data in select agricultural regions around the globe”
June 10, 2021 “Planet And Farmers Edge Agree To New Contract To Power Sustainable And Profitable Farming”
“We’re thrilled to announce that Planet has signed a new, three-year, non-exclusive contract with Farmers Edge, a valued customer since 2017.”
Now it’s non-exclusive.
Planet has plans to increase their software staff by 300% as I recall Planet Ceo Will Marshall has stated.
Maybe they should buy Farmers Edge? Price around 1/10 of Planet. Or does it seem like their collaboration is diminishing?
More interesting things to note. We’ll attack this first with an updated piece on Farmers Edge.
Then, we’ll take the other side with a piece on Planet which will come out whenever their SPAC merger gets finalized.