Packeteer Seems To Be Entering A Growth Phase

| About: Packeteer Inc. (PKTR)
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It seems to be the day of modest outperformance rewarded with outsized stock gains. Earlier I wrote about CyberSource (CYBS) rising over 26% on a small beat in earnings Thursday night. Next up is $326 million (market cap) network equipment maker Packeteer (PKTR), rising nearly 11% Friday to $9.06 after reporting better-than-expected earnings Thursday night.

What’s the big deal? Well, nothing very good, it sounds like. Ferris Baker Watts analyst Matthew Robison, upgrading the stock from Sell to Neutral Friday, is raising his estimates for the current quarter from a net loss per share of 5 cents to a net profit of 2 cents. Okay, but he’s also dropping coverage of the stock for the time being because Packeteer has yet to resolve an IRS charge dating back to June 29 alleging that the company has an additional $122 million in taxes it owes the government.

In search of further clues, I dug up a note by Eric Suppiger with Signal Hill Equity Research, who has a Buy rating on the stock. Suppiger argues Packeteer is moving out of its turn-around phase and entering a growth phase. He’s raising his sales estimate for next year by a few million, to $176 million, and his EPS by a penny, to 26 cents. But most of Suppiger’s argument is that Packeteer’s in the same market for “WAN optimization” technology as RiverBed Technology (NASDAQ:RVBD), whose stock has risen nearly 57% this year. Packeteer’s new technology in this market “gives the company a compelling upgrade cycle.” Suppiger has no price target in his note, however.

There you have it: turnaround stories transitioning to growth can work even in a market obsessed with momentum-driven Mega-Caps!

PKTR 1-yr chart: