Why Planet Labs Stock Dropped 3% This Morning

Planet Labs (NYSE: PL) stock slipped 3% through 9:50 a.m. ET Wednesday on what investors would ordinarily consider good news: another contract announcement.

Planet revealed today that it has "expanded" a relationship with the Antinarcotics Directorate of the Colombian National Police (DIRAN), whereby the latter uses images from Planet Labs' Earth observation satellites to detect and help eradicate "illicit crop growth and harvest" (i.e. drug crops).

More uses for Planet Labs' satellites

Planet's satellites can survey agricultural plots at approximately three-meter resolution from orbit, then narrow their focus to 50-centimeter resolution to confirm the presence of coca crops, providing valuable data to DIRAN. Planet notes that it has been providing such data to Colombia since 2017, but the new contract will expand the data it provides -- and, presumably, the revenue it receives.

Planet did not state a dollar value for the contract, implying that the value is not material to Planet.

Public relations versus revenue

This is now the third time in two weeks that Planet has made such PR-focused contract announcements. The past two contracts were described as being worth "six figures" and "seven figures," respectively. The lack of even such a vague description today suggests the DIRAN contract is even smaller in value, and unlikely to move the needle on Planet's annual revenues.

Meanwhile, investors await the company's Q3 earnings release, which is scheduled to arrive on the other side of this weekend, on Monday, Dec. 9. The good news is that even if the contracts announced over the past two weeks are individually small, enough small contract wins can still add up to respectable growth. Analysts forecast Planet will report $63.1 million in Q3 revenue, up 14% year over year, according to Yahoo! Finance data. Earnings will probably remain negative at a loss of $0.04 per share.

Will that suffice to lift Planet's stock price? It's hard to say, but today's share price weakness suggests investors are starting to lose patience with Planet stock and will want to see more substantial improvement next week.

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Rich Smith has positions in Planet Labs Pbc. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.