Two Huge Unusual Volume Spikes, Earnings Redemption (MERU, BCOR)

Earnings season peaked this week and we have seen many huge winners and losers emerge from this season.  On Friday we have two very unusual earnings gainers and we think these names will merit some additional research over the weekend.  One is up over 60% and one is up over 20%.  These have also both been considered as down and out turnaround stocks.

Meru Networks, Inc. (NASDAQ: MERU) surged after beating earnings expectations handily.  The wireless LAN provider is worth a mere 448 million according to Yahoo! Finance, and that is after a 61.5% gain to $2.73.  What is interesting here is that the $1.69 pre-earnings trading level compared to a 52-week range of $1.42 to $10.61. We have also seen over 1.4 million shares trade when there are only almost 170,000 shares traded on a normal day.

Meru posted a 26% gain in sequential revenue growth and its total customer count was up to over 6,600. Total revenues for the second quarter of 2012 were $24.5 million, up 5% from $23.2 million in the second quarter of 2011. Unfortunately it reported a non-GAAP net loss.

Blucora, Inc. (NASDAQ: BCOR) is one which most investors do not even know about. The company is somewhat of a hidden company offering “white label search and monetization solutions to Web publishers.”  This is the former Infospace Inc. (NASDAQ: INSP).  Well, how does 86% growth sound?  Revenue rose to $100.9 million from $54.2 million a year ago and it sees revenues of $90 to $93 million next quarter.  Its market cap after a 27% gain by late Friday is now $652 million.

If you want to know about a good analyst call, look at one reported by TheFlyOnTheWall.com back on July 17: “Benchmark Co. continues to view Blucora as an attractive investment and believes the risk/reward for shares is favorable around the company’s Q2 earnings report. The firm keeps a Buy rating on the stock with a $17 price target.”  Shares closed at $13.08 that day.

Chasing names after huge gains can be a very tricky game. We would certainly advise turnaround investors to do more research over the weekend before jumping into these without doing more work on them.

JON C. OGG