Why Planet Labs stock is going to the moon today

Planet Labs (PL 6.75%) the stock was up 7.6% by 10:25 a.m. ET Monday.

The small-cap space stock announced this morning that it has been “selected” to participate in “NASA’s Commercial SmallSat Data Acquisition (CSDA) Program On-Ramp1 Multiple Award Contract” to “provide commercial data in support of agency’s Earth science research” in a contract worth up to $476 million.

What NASA wants from Planet Labs

Basically, NASA hired Planeta to work as a photographer. That’s good news, but before you get too excited, here are some details.

First, not all of the money will be allocated at once, but rather spread over four years. The contract runs through November 2028, so annually it looks more like a $100 million contract than a $500 million contract.

Plus, Planet probably won’t get all of the $476 million for itself. This number is actually a cap on the government’s indefinite delivery, indefinite quantity contract that may not be fully awarded and will be shared with other space companies. As NASA explained Friday, eight different space companies will participate in the award. In addition to Planet, these are BlackSky, Satellite, Teledyne (TDY 2.23%)Iceye, Pixel Space, The Tomorrow Companies and Canada’s MDA.

However, as the owner of the world’s largest constellation of Earth observation satellites, Planet Labs will likely receive at least some from this money. For a company that only grew sales by 14% last quarter, that’s good news.

Is Planet Labs Stock a Buy?

I’m just not sure that’s good enough news to make a buy on Planet Labs stock. $476 million divided by four divided by eight means that, on average, each company involved in the CSDA can expect an annual increase in revenue of $15 million.

That’s not insignificant — it’s about 6% of Planet’s annual revenue. But it’s probably not enough to move the needle on Planet Labs stock or change the fact that Planet Labs will remain unprofitable and continue to burn cash for the duration of this contract.