Ariba shares moved up 7 3/8, or 10 percent, to 79 3/8 Thursday, one day after the business-to-business services provider posted a smaller-than-expected loss in its second quarter.
In the quarter, Ariba lost $11.5 million, or 6 cents a share, on sales of $40 million.
First Call consensus expected Ariba to lose 8 cents a share in the quarter.
On Thursday, Merrill Lynch responded by upgrading the stock from a near-term "accumulate" rating to a near-term "buy."
Merrill's Chris Shilakes raised his fiscal 2000 revenue estimate to $171 million from $125 million and his fiscal 2001 revenue target from $237 million to $340 million.
We are upgrading Ariba from accumulate to buy, despite a difficult technology tape," Shilakes said in a research note. "Valuation is still subjective, but fundamentals seem stunning here."
He also set a 12-month price target of $100 a share.
Including acquisition-related charges, Ariba lost $125.9 million, or 70 cents a share, in the quarter.
"I'm extremely pleased to report a phenomenal quarter," CFO Edward P. Kinsey said during a Wednesday afternoon conference call with analysts. "The quality of our financials has continued to be a benchmark for the industry."
Second quarter revenue increased to $40 million, a 322 percent gain from a year earlier, 71 percent improvement sequentially and 38 percent above consensus estimates. Total customers more than doubled as Ariba signed 79 new deals during the quarter, executives said.
The network effect continues to accelerate," Kinsey said. "It really seems like the more buyers and suppliers we sign, the more buyers and suppliers we attract."
Revenue growth was slightly above Ariba's prediction from a week ago, which was already higher than Wall Street consensus forecasts.
First Call consensus expects Ariba to lose 7 cents a share in its third quarter and 26 cents a share in the fiscal year.
All 22 analysts covering the stock maintain either a "buy" or "strong buy" recommendation.
Ariba shares stormed up to a 52-week high of 183 5/16 in March after slipping to a low of 15 1/4 in August.