Zacks Praises Planet Labs' R&D as DeepValue Maintains Sell Caution on Valuation Risks

What happened

Zacks Investment Research published an article on January 22, 2026, highlighting Planet Labs' heavy R&D spending as central to long-term profitability by driving satellite innovation, despite near-term earnings pressure. This comes after Planet's stock surged 590% over 12 months to $26.38, fueled by sovereign contract wins like JSAT, Germany, and Sweden, which boosted backlog to $734 million. However, the DeepValue master report rates PL as a 'POTENTIAL SELL' due to its rich valuation at over 25x FY26 revenue, persistent GAAP losses, and rising capex at 27-30% of revenue. The report critically notes that while R&D supports innovation, it contributes to capital intensity that strains free cash flow, with only 33% of backlog converting within 12 months and contracts being cancellable. Investors should view the R&D narrative skeptically, as it does not address the already aggressive pricing of future growth or execution risks in a crowded trade.

Implication

The emphasis on R&D spending underscores Planet's strategy to maintain technological leadership in satellite constellations, which is necessary for long-term margin expansion but exacerbates near-term financial pressures from high capital intensity. DeepValue's analysis shows the stock's 590% rally has priced in sustained mid-20s% growth and sovereign wins, leaving no valuation margin of safety if execution falters. Investors should heed the 'POTENTIAL SELL' rating by considering trimming positions above $30 and avoiding new purchases until a pullback to ~$18, where risk-reward improves. Key risks include potential contract cancellations, slower backlog conversion, and rising capex outpacing new awards, which could drive the stock toward the bear case of $15. Monitoring FY27 guidance and additional sovereign deals in the next 6-12 months is essential to validate the profitability thesis beyond promotional narratives.

Thesis delta

The Zacks article does not shift the DeepValue investment thesis, as R&D spending is already accounted for in the analysis of Planet's capital-intensive model and near-term earnings pressure. It reiterates the company's innovation focus but offers no new evidence to alter the 'POTENTIAL SELL' rating, which hinges on valuation risks and execution uncertainties rather than R&D optimism. Investors should remain skeptical until tangible improvements in GAAP profitability or backlog sustainability emerge.