Aggressive Options Activity Warrants a Close Look at Planet Labs (PL)

When a hot small-capitalization play like Planet Labs (PL) encounters a double-digit percentage rise over a single session, it’s typically a good time to exit. Sure, the aerospace and defense specialist – which focuses on providing global, daily satellite imagery and geospatial solutions – could continue to move higher. However, skepticism always looms over such entities, subjecting PL stock to significant volatility risks.

On Monday, shares screamed higher by 12.7%, eventually closing at $2.84. But perhaps not surprisingly, the afterhours session was more muted, with the equity losing slightly more than 1%. It’s not that PL stock is incapable of robust moves northward. However, such resoundingly optimistic sessions usually lead to devastating corrections. Therefore, it’s natural for speculators to be cagey regarding the opportunity.

Still, the present bullishness may be more than just random speculation. Primarily, PL stock could be contextually undervalued. To be sure, shares trade hands right now at 3.53X trailing-year revenue. That’s quite high relative to the underlying industry’s average sales multiple of 1.82X. Nevertheless, investors should also consider the expected revenue growth of Planet Labs.

By the end of the current fiscal year (2025), sales may reach $254.64 million. Assuming a shares outstanding count of 290.77 million, PL stock is trading at a forward sales multiple of 3.24X. By the following year, revenue may rise to $299.86 million. In that case (and assuming no change in shares outstanding), the multiple drops to 2.75X.

Notably, the high-side estimate for the top line in fiscal 2026 calls for $318.7 million. Under present conditions, PL’s price-to-sales ratio would decline to 2.59X. That doesn’t quite get down to objectively undervalued for the industry.

Still, the space economy may be due for massive growth, with McKinsey & Company targeting a valuation of $1.8 trillion by 2035 (accounting for inflation). That’s way up from last year’s market value of $630 billion or a compound annual growth rate of 9.14%. Notably, this is a faster growth rate than the mainline aerospace and defense sector, which may expand by 5.8%.

In other words, PL stock just might deserve a higher premium.

Technical Strength in PL Stock

Part of the enthusiasm for Planet Labs centers on the robust nature of its pricing dynamics. On Monday, PL stock printed a big-bodied candlestick with no upper wick. Essentially, the intraday high of $2.84 matched the closing price: the bulls just kept piling into the satellite specialist.

On the prior Friday session, PL stock gapped up to start the day and rarely looked back. However, what was interesting was that in this case, PL did print a relatively small wick. In other words, there was slight hesitation among the optimists in pushing shares higher. However, Monday’s price action erased any lingering doubts.

Of course, the market is forward looking so it puts the next few sessions’ projected dynamics in the spotlight. What made yesterday’s big move higher special was that it broke convincingly above the $2.60 resistance line that has dogged shares since September of last year. It’s possible that the bears will attempt to drive down the value to this point.

Still, being so close to the $3 level, even if some volatility occurs in the next few sessions, the bulls will likely be targeting this significant price zone. First, it’s a psychologically significant milestone. Second, the $3 level previously acted as support in June 2023. In September last year, the price of PL stock gapped below this point. Therefore, it holds significance.

What’s more, options traders appear to be betting on bigger and better things.

Unusual Options Activity Puts the Spotlight on Planet Labs

Thanks to the robust move, it wasn’t surprising to see PL stock represented in Barchart’s screener for unusual stock options volume. This screener details the moves made by the smart money, potentially signaling to retail investors where the next big swing (or downfall) may materialize.

On Monday, total volume for PL stock options reached 11,145 contracts versus an open interest reading of 18,547 contracts. The difference in volume from yesterday compared to its trailing one-month average came out to 894.2%. What’s more, call volume clocked in at 10,887 contracts while put volume sat at only 258 contracts, yielding a lowly put/call volume ratio of 0.02.

On paper, such a ratio indicates that more traders are buying calls than puts, which seems bullish. However, Barchart’s options flow screener – which focuses exclusively on big block transactions likely placed by institutional or professional investors – is more instructive. Here, the net trade sentiment stood at $125,800 favoring the bulls.

Indeed, premiums for options with bullish sentiment totaled $137,000 while the same exercise for bearish options landed at only $-11,200. Not only were traders overwhelmingly optimistic about PL stock on Monday, they also placed heavy wagers on $5 calls across various strike prices.

That’s mighty aggressive considering that it’s almost a doubling in market value from Monday’s close. Still, it’s not entirely out of the realm of possibility given the small stature of Planet Labs, which affords its shares “buoyancy.” In addition, the booming space economy could see PL stock run hard and fast.

At least, that’s what the smart money seems to be betting on. Retail investors may want to keep Planet Labs on their watchlist.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.