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On Friday, Goldman Sachs analyst Noah Poponak downgraded Planet Labs shares, listed on the New York Stock Exchange (NYSE:PL), from "Buy" to "Neutral". Accompanying the downgrade, the price target was significantly reduced from $6.00 to $3.50. The revision comes after the company's forecast indicated continued negative EBITDA for the fiscal year 2025, contradicting expectations of a profitable turnaround. The company, currently valued at $1.02 billion, trades at $3.14 per share and has maintained revenue growth of 10.72% over the last twelve months.
Poponak's assessment acknowledged the long-term growth potential of Planet Labs but raised concerns over the company's ability to achieve profitability. The analyst had previously anticipated that Planet Labs would reach a consistently profitable level following a milestone late last year. However, the recent forecast from the company's management has adjusted this outlook. InvestingPro data reveals that while the company maintains impressive gross profit margins of 57.65%, it remains unprofitable over the last twelve months. InvestingPro subscribers have access to 10 additional key insights about Planet Labs' financial health and prospects.
The downgrade reflects uncertainties regarding Planet Labs' financial performance in the face of a challenging macro-economic environment. Poponak noted that if current economic conditions persist, Planet Labs could face additional hurdles in commercial sales. The analyst also mentioned that stocks that are not profitable often struggle to experience an expansion in their valuation multiples. According to InvestingPro, the company maintains a healthy current ratio of 2.13, indicating strong short-term liquidity despite profitability challenges.
The report from Goldman Sachs suggests a cautious stance on Planet Labs, with an emphasis on the company's need to prove its profitability amidst potential macro-economic headwinds. The revised price target of $3.50 represents a significant decrease from the previous target, indicating a recalibration of expectations for the company's stock performance.
Investors are expected to closely monitor Planet Labs' forthcoming financial results and any strategic initiatives the company may undertake to address profitability and sales growth. The impact of the downgrade on the company's stock performance in the upcoming trading sessions remains to be seen.
In other recent news, Planet Labs has been active with several notable developments. The company reported that its adjusted EBITDA for the fourth quarter of fiscal year 2025 surpassed expectations, though its revenue guidance for fiscal year 2026 was in line, and its adjusted EBITDA guidance fell short of Wall Street predictions. A significant $230 million agreement with JSAT is expected to impact its fiscal year 2026 performance, as Planet Labs will sell satellite hardware directly to JSAT, aiming to reduce cash burn by half. Additionally, Planet Labs has expanded its collaboration with onX, a digital navigation leader, to provide near-daily satellite imagery for outdoor apps, enhancing user experiences with updated views of recreational landscapes.
In terms of analyst ratings, Cantor Fitzgerald has maintained an Overweight rating on Planet Labs, with a price target of $6.30, while Benchmark analysts have reiterated a Buy rating with a $7.00 target. Cantor Fitzgerald's analysis highlights the potential for high incremental margins and significant government contract expansion. Meanwhile, Benchmark analysts emphasize the strategic shift to selling satellite hardware as transformative, offering a pathway to positive free cash flow within 24 months.
Moreover, Planet Labs has secured a contract with the European Space Agency on behalf of Greece's Hellenic Ministry of Digital Governance to support the Greek National SmallSat Programme. This contract aims to enhance Greece's satellite technology development using Planet's data, which provides near-daily scans of Earth's landmass. These recent developments suggest Planet Labs is strategically positioning itself for growth and expansion in various sectors.
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