What happened

Shares of video streaming technology provider Harmonic (HLIT -0.67%) catapulted to a 17.8% gain through noon ET Tuesday after beating analyst targets for earnings and almost hitting sales targets last night.  

Wall Street had forecast an $0.08 per share non-GAAP profit (generally accepted accounting principles) for the company, on sales of $157.8 million. Harmonic delivered all $0.12 of non-GAAP earnings, and its sales were $157.6 million.  

So what

Sales grew 7% year over year, led by a 23% gain in revenue from broadband services, and 72% from video software-as-a-service (SaaS). Gross profit margins on those revenues surged 640 basis points to 53.3%.

As you'd expect, this resulted in a big improvement in earnings year over year. As calculated according to GAAP, earnings flipped from a $0.01 per-share loss a year ago to a $0.04 per-share profit this time around. Non-GAAP earnings improved by 50%.

Now what

Adding to the good news, Harmonic promised further GAAP profits in Q2 and beyond. Guiding to $161 million to $171 million in Q2 sales, even a slight weakening in gross profit margin (51.7% to 52.8%) should leave Harmonic with $0.04 to $0.06 per share in real GAAP profit this coming quarter.

For the year, management is forecasting sales of $705 million to $740 million. Again, despite a slight slackening in gross profit margins (50.6% to 51.6%), earnings are likely to range from $0.26 to $0.33 per share -- with non-GAAP profits ranging from $0.63 to $0.74. Taken at their midpoints, these new ranges appear likely to beat analyst forecasts for $718.5 million in sales and $0.66 per share in non-GAAP profits.  

That's probably the reason Harmonic stock is moving so much higher today -- the prospect of a whole year of earnings beats. If I might inject just one note of caution into the debate, however: Even if Harmonic maxes out its GAAP earnings projection this year, its stock would be trading for about 48 times current-year earnings. That seems pretty pricey to me.

If you're enjoying today's stock price rally in Harmonic, congratulations. But to be frank, I'd take the money and run.