Laws and Order: Part 2
Planet shares are still skirting the laws of gravity — up more than 700% since the beginning of last year. Lamplighter made the case that its hype isn't tied to the broader market. It's also not built on what the company’s achieved so far. It's also not really built on what investors see in its existing book of business.
So, investors are just drinking the Tang (space travel favored Tang over Kool-Aid)?
Maybe.
We can sample a few theories that might be luring investors to the shares. In order of increasing importance:
Bigger is better
Planet’s business today is working a tiny neighborhood of customers. It’s offering could be valuable to a vastly larger community of customers in the future.
Planet’s business naturally gets more valuable. AI capabilities have made the time for customers to get value much shorter.
Bigger is better
Planet's current market value — around $15 billion mid-April — puts it at a size that makes it attractive to more and bigger investors. Institutions and indices manage huge amounts of money. They can’t put much to work when a company is only $1.5 billion, like Planet was at the beginning of 2025. Once companies move north of $10 billion, ETFs and funds’ interest peaks. Helpfully, they’re sometimes inattentive to underlying financial performance. The market of buyers simply changes as companies get bigger. Getting bigger opened up Planet’s shares to a broader audience of investors. More investors demanding more shares naturally lifts price.
A second consequence of companies getting bigger is better performance. Probably. This isn't an observation about Planet in particular, but companies generally. Michael Mauboussin summarizes the trend that as companies get bigger, their underlying financial returns tend to get better — increasing returns to scale. This is a relatively new phenomenon, but one that has been particularly true for companies that conjure their value through technology, like Planet.
Planet mixes a few of the key ingredients to increasing returns to scale. It's developed its own technology — inexpensive earth observation satellites — that potential competitors find difficult to replicate. It can deliver its products — data, images and insights — without much additional cost — it’s just delivering bits. Finally, it controls who gets its data and images and how. An upstart couldn't reverse engineer a competitive offering without first developing its own technology and satellite network and spending years collecting observations.
Growing neighborhoods
Before Planet, the satellite commercial imaging market was basically two companies — Maxar and Thales. Planet never really went to compete head to head with them. It served different technology, different solutions, and different products.
Planet set out to balance its business between defense and intelligence, civil government and commercial customers. It hasn’t worked out this way. The market tilted in favor of defense and intelligence applications. Those customers buy 60% of Planet’s offering. That's where the deepest pockets were. That's where the most urgent demand was. That's where the business focuses today.
Planet still has eyes on the civil and commercial markets. Those markets potentially offer a much larger opportunity.
There are plenty of situations that started in defense and moved on to later, greater commercial success. Bell labs invented transistors to solve reliability and portability problems for military radios. Transistors and the semiconductors they were built on went on to become the economy. Every device that uses electricity today uses transistors. The internet began as a DOD pet project. 30 years later it’s everywhere. More recently, Anthropic declined some defense business, in part, because its commercial business is cooking. It gets a better return from focusing on that.
For Planet, the drawback is that the commercial market for up-to-the-minute data or insights about the earth doesn't exist today. Planet needs to build it. It's doing this. It takes time. If it's successful, the prize is massively bigger than what it could make from its existing defense and intelligence customers.
Appreciating data
AI feeds on data and compute. Right now, there's a frenzy. As intelligence moves towards being available to everyone, unique sources of information become more valuable. VC Josh Wolfe says "the real value is going to be in the repository of data, longitudinal data, deep data." Lamplighter mostly agrees. Planet makes AI catnip — deep, longitudinal data.
Planet’s library of global imagery coverage in a variety of flavors — resolutions and spectral bands — going back a decade supports the entire business. It collects more data about every piece of land on earth every day. Absent time travel, this is unreproducible. No one else is doing it today. Its lead keeps growing. New AI tools rolling out relentlessly from Planet and from its lab partners — Anthropic, Google et. al. — make getting insights from all this much easier, much sooner and likely much more valuable.
How valuable?
TBD. Whatever its value, it's growing and it's growing faster than, well, no one else is collecting it, so it's growing faster than the alternative, which is nothing.
Exit velocity
Planet’s economics still need to prove its worth. At $15 billion, Planet is very big compared to its current business — $300m in revenue in 2025. But it's not too big to succeed. Companies with that size revenue tend to have higher growth rates. In fact, about one in five manage growth above 25% for 10 years. That kind of trajectory would just about justify its current market price. Planet notched 41% growth last year. The Street expects Planet to grow about 35% each of the next few years through January 2029.
This is all achievable. Another government-focused AI story, Palantir, made great strides towards justifying what looked like ridiculous expectations a few years ago. Its business performance has been stellar — 33% annual revenue growth over the past seven years, making $2.3 billion in cash last year, increasing that 51% from the year before. Palantir's market value still looks a bit aspirational. It's worth 10x what Planet is — the businesses aren't related at all. The only relevance is the playbook to scale and create value from a government-focused technology business. Palantir's performance is a useful — aspirational — roadmap.
It’s all far from a sure thing. Planet at $35 a share is a much riskier proposition than Planet at $3.50 a share. If it's successful from here, these are a few of the ways investors are looking at the shares today to make that case. While expectations have risen, they're still not out of this world.
Disclaimer: None of this is investment advice. It's meant to illustrate ways LCM thinks about investing. Things that LCM decides are good investments for LCM and its clients are based on many criteria, not all of which are covered here. Some or all of LCM's ideas may not be suitable for other investors. LCM does not recommend investing either long or short any position mentioned. LCM may own positions in some of the companies mentioned. Some of its ideas will lose money — investing entails risk. See full disclaimer here.