Robert DeFrancesco’s

TechStockProspector.com
January 30, 2011

Acme Packet (APKT) Priced For Perfection, Readies Q4

Results
Acme Packet (APKT, $53.71) is on deck to report Q4 results after the close on
Tuesday. There’s a lot riding on these results as the shares are up 35% since the Q3
report. The stock, although down from the January 6 high of $62.96, still trades at a
lofty 51 times the 2011 consensus EPS estimate of $1.04.

In the September quarter, Acme Packets reported EPS of 20 cents, one cent above
the consensus estimate, on revenue of $56.6 million, slightly above the consensus of
$55 million. Product revenue advanced 8% sequentially to $45.3 million. Gross
margin came in at 83% and operating margin at 37.7%.

Given the current environment for cloud-computing companies (high expectations

must be exceeded), Acme Packet might need to put up a bigger beat than it did last
quarter to justify the current share price. For Q4, the consensus estimates: 22 cents
on revenue of $60.2 million. The high estimates: EPS of 31 cents and revenue of
$62.2 million.

During the Q3 earnings call, CEO Andy Ory said initial indications were for 2011
revenue growth of around 30%. The market will expect the company to at least
reiterate this forecast, and hopefully boost it. The 2011 consensus revenue estimate
of $295.8 million suggests expected growth of closer to 34%.

In early January, Deutsche Bank boosted its price target to $63 from $45, saying
Acme Packet should continue to accelerate earnings this year and next thanks to
solid product cycle momentum for the company’s SBC gear. The firm expects the
sales ramp to be driven by TAM expansion opportunities in enterprise SIP trunking,
public sector SBC rollouts and IP video.

Rob DeFrancesco, editor of Tech-Stock Prospector, is a former senior writer with Louis
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