Whereas the broader markets are buying and selling close to all-time highs, a number of TSX tech shares are priced at a reduction to consensus worth targets. One such Canadian inventory is Open Textual content (TSX:OTEX), with a market cap of $7.7 billion.
Open Textual content has underperformed its friends lately and is down nearly 40% from its all-time highs. The continued pullback has meant OTEX inventory has returned 61% to shareholders over the previous decade, even when adjusted for dividend reinvestments.
Nonetheless, the drawdown permits shareholders to purchase the dip and achieve publicity to an organization that provides a dividend yield of three.5%.
Is the Canadian tech inventory purchase?
OpenText Company develops and sells data administration software program and cloud options globally.
The corporate affords software-as-a-service, APIs (utility programming interfaces), hosted companies, and packaged enterprise purposes, together with content material administration, cybersecurity, DevOps, analytics, and AI companies. Income streams embrace cloud subscriptions, software program licensing, consulting, coaching, and managed companies.
OpenText maintains strategic partnerships with SAP, Google Cloud, AWS, Microsoft, Oracle, and Salesforce, in addition to methods integrators corresponding to Accenture and Deloitte. The corporate serves enterprise organizations, authorities companies, and mid-market companies worldwide.
In fiscal Q1 of 2026 (led to September):
- Open Textual content reported income of US$1.3 billion, a rise of 1.5% 12 months over 12 months, as cloud gross sales rose 6% to US$485 million.
- The standout efficiency got here from Open Textual content’s Content material enterprise, which represents roughly 40% of complete income and noticed cloud development speed up to 21% 12 months over 12 months.
- That marks a major bounce from the 17% cloud development price the division posted final 12 months.
- The corporate’s present remaining efficiency obligations, a key metric for future cloud income, elevated 6% 12 months over 12 months, whereas long-term cloud RPO surged 16%.
Govt Chair Tom Jenkins has outlined a transparent technique to divest 15% to twenty% of the corporate’s income by promoting non-core enterprise items.
The aim is to focus completely on content material that trains agentic AI methods. Open Textual content already offered its eDOCS enterprise and plans to shed one extra unit per quarter over the following three quarters. Jenkins emphasised that the tempo of divestitures displays operational warning fairly than market demand constraints.
The corporate’s positioning in AI stems from its huge library of knowledge connectors constructed over 35 years. Open Textual content maintains over 1,500 connectors to legacy and present enterprise methods, offering entry to content material behind company firewalls that public AI fashions can’t attain. A latest MIT research discovered that 95% of early enterprise AI initiatives failed primarily on account of inadequate coaching content material.
New CFO Steve Rai, who joined in October from BlackBerry, signalled that prospects are accelerating their cloud migrations quicker than anticipated.
This shift creates a income recognition timing problem, through which license income declines within the close to time period however is changed by bigger recurring cloud contracts. The corporate expects to transform every greenback of upkeep income into two {dollars} of cloud income.
Open Textual content closed 33 offers exceeding US$1 million within the first quarter, up 43% 12 months over 12 months. The corporate maintained its full-year fiscal 2026 outlook at the same time as Q2 income steering got here in under estimates.
What’s the OTEX inventory worth goal?
Analysts forecast income to extend from US$5.17 billion in fiscal 2025 to $US5.37 billion in fiscal 2028. On this interval, adjusted earnings per share are forecast to develop from US$3.82 to US$4.77.
OTEX inventory trades at a ahead earnings a number of of seven.4 instances, which is under its 10-year common of 12.1 instances. On the present a number of, it may achieve 15% over the following 18 months. If we alter for dividends, cumulative returns could possibly be nearer to twenty%.
Bay Road stays bullish on the Canadian tech inventory and forecasts a 30% surge from present ranges.
