THE SPARK: Analyst Kent Schofield raised his price target by $3 to $14 per share, meaning he expects the stock to rise about 31 percent from its latest closing price.
He said that investors are concerned with the state of the videoconferencing equipment market and expect weak first-quarter results. Because of that, they've been hard on the stock: Shares dropped 36 percent last year. They've edged up 2 percent in 2013.
THE BIG PICTURE: Schofield said the market for videoconferencing equipment won't return to its level of growth from a few years ago, but sales will stop declining and will start to grow.
The Pleasanton, Calif., company has said its competitors are increasingly focused on developing new software and virtual software rather than hardware. Schofield said Polycom and Cisco Systems Inc. dominate the video conferencing hardware market, but clients were careful with their spending in 2012, and they spend less money on hardware as they considered software options. He thinks clients will start investing in hardware again
In 2012 Polycom's revenue fell 1 percent to $1.39 billion in 2012 because of lower product sales.
THE ANALYSIS: Schofield credited Polycom with keeping expenses down, which will help lift profit as sales recover.
He expects sales growth of 6 percent this year. That's more optimistic than most analysts. Those polled by FactSet expect revenue to grow 4 percent, to $1.45 billion, this year. The company has projected that sales will grow by a mid- to high-single-digit percentage.
Polycom also expects that adjusted profit will improve in 2013.
The introduction of new products should also help the company's shares, Schofield said.
Schofield had rated Polycom stock "Neutral."
SHARE ACTION: Polycom stock picked up 69 cents, or 6.4 percent, to $11.34 in afternoon trading.