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Investing.com - Scotiabank (TSX:BNS) raised its price target on Open Text (NASDAQ:OTEX) to $35.00 from $30.00 on Tuesday, while maintaining a Sector Perform rating on the stock. The company, currently trading at $30.22, appears undervalued according to InvestingPro analysis, with impressive gross profit margins of 75.9%.
The price target increase follows Open Text’s Q4 results and fiscal year 2026 outlook released last week, which projected cloud growth of 3%-4% compared to 2% in fiscal year 2025.
Open Text announced several leadership changes, including the board’s decision to pursue a new CEO to replace longstanding chief executive Mark Barrenechea, along with an ongoing search for a permanent CFO.
The company remains focused on portfolio-shaping opportunities, including potential asset sales, as it looks to grow its core Information Management business, which comprised approximately 35% of its fiscal year 2025 cloud mix and grew 10% during that period.
Scotiabank’s new $35 price target is based on approximately 7.0x calendar year 2026 EBITDA, up from the previous multiple of about 6.0x, with the firm citing early positive signals in cloud momentum, including a 30% increase in pipeline for fiscal year 2025, 8% growth in cloud current remaining performance obligations, and improving conversion rates.
In other recent news, Open Text Corporation reported strong financial results for the fourth quarter of 2025, surpassing both earnings and revenue expectations. The company’s earnings per share (EPS) reached $0.97, exceeding the anticipated $0.82, while revenue amounted to $1.31 billion, above the projected $1.28 billion. These results have been seen as a positive indicator by investors. Additionally, Open Text has undergone significant leadership changes, with James McGourlay appointed as Interim Chief Executive Officer following the departure of longtime CEO Mark Barrenechea. McGourlay brings 25 years of experience with the company, having previously served as Executive Vice President of International Sales. Jefferies responded to the leadership changes by downgrading Open Text’s stock rating from Buy to Hold and adjusting the price target to $33.00 from $35.00. In contrast, Barclays (LON:BARC) raised its price target for Open Text to $33.00 from $29.00, maintaining an Equalweight rating. Barclays noted the company’s fourth-quarter performance as a potential turning point, highlighting its highest top-line beat since the third quarter of 2023.
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