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Investing.com - Scotiabank upgraded Open Text (NASDAQ:OTEX) from Sector Perform to Sector Outperform on Wednesday, while raising its price target to $50.00 from $35.00. According to InvestingPro data, the stock is currently trading near its 52-week high of $38.26, having delivered an impressive 40.24% return over the past six months.
The upgrade reflects Scotiabank’s increased conviction in Open Text’s Content Management business, which represents approximately 40% of the company’s revenue. The firm views this segment as an underappreciated asset operating at a Rule-of-40 profile, supported by the company’s robust gross profit margin of 75.9% and overall GOOD financial health score.
Scotiabank believes Open Text is positioned to benefit from artificial intelligence due to its leadership in organizing unstructured data from various content sources securely behind corporate firewalls.
The firm expects the divestiture of several non-core assets over the coming quarters will reveal a stronger underlying Enterprise Software business, with cloud growth of 5.8% versus the reported 1.9% in fiscal year 2025.
Scotiabank also anticipates new leadership announcements by year-end for CEO and CFO positions, which it expects will be positively received by the market, while its new valuation applies a 13.0x CY26 EBITDA multiple on the Content business and a 5.0x multiple to other business units.
In other recent news, Open Text has been the focus of several analyst updates and strategic developments. National Bank Financial upgraded Open Text’s stock rating from Sector Perform to Outperform, raising its price target from $34.00 to $45.00. This upgrade came after discussions with Open Text’s executive team about the company’s strategy. Meanwhile, RBC Capital and Scotiabank both increased their price targets for Open Text to $35.00, maintaining a Sector Perform rating. RBC Capital’s adjustment was based on expectations of an upward valuation re-rating, while Scotiabank’s decision followed Open Text’s recent Q4 results and fiscal year 2026 outlook, which anticipated cloud growth of 3%-4%.
Additionally, Open Text announced its participation in the HPE Unleash AI partner program, aiming to accelerate enterprise AI adoption. This partnership will integrate Open Text’s Aviator AI solutions with HPE’s enterprise AI platform. Furthermore, a study by Canalys highlighted that managed service providers using Open Text’s cybersecurity solutions could achieve up to a 6.7 times return on investment. The study noted significant revenue growth opportunities through managed services and long-term support. These developments reflect Open Text’s ongoing efforts to enhance its market position and service offerings.
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