Recommendation: Speculative Buy
| Entry Date | Symbol | Recommendation | Entry Price (CAD) | Target 1 (CAD) | Target 2 (CAD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 21 Nov, 24 | OTEX | Speculative Buy | CAD 40.38 | CAD 44.822 | CAD 47.511 | 59 days | 17.7% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Open Text Corporation engages in the provision of information management products and services. The company offers content services, including content collaboration and intelligent capture to records management, collaboration, e-signatures, and archiving; and operates experience cloud platform that provides customer experience and web content management, digital asset management, customer analytics, AI and insights, e-discovery, digital fax, omnichannel communications, secure messaging, and voice of customer, as well as customer journey, testing, and segmentation. It also provides cybersecurity cloud solutions to protect, prevent, detect, respond, and quickly recover from threats across endpoints, network, applications, IT infrastructure and data, AI-led threat intelligence; and to protect critical information and processes through threat intelligence, forensics, identity, encryption, and cloud-based application security. In addition, the company offers business network cloud for digital supply chains and secure e-commerce ecosystems including digitize and automate procure-to-pay and order-to-cash processes; IT operations management cloud for automation and advancement of IT support and asset management; analytics and AI cloud solutions that offers artificial intelligence with practical usage to provide organizations with actionable insights and better automation, such as visualizations, advanced natural language processing and understanding, and integrated computer vision capabilities; and provides application automation cloud, developers cloud, and services. Further, it has strategic partnerships with SAP SE, Google Cloud, Amazon AWS, Microsoft Corporation, Oracle Corporation, Salesforce.com Corporation, DXC Technology Company, Accenture plc, Capgemini Technology Services SAS, Deloitte Consulting LLP, Hewlett Packard Enterprises, and Tata Consultancy Services. The company was incorporated in 1991 and is headquartered in Waterloo, Canada.
Higher Operating Margin: 16.3% in Q1 2025 vs 14.9% in Q1 2024
Higher Net Margin: 6.7% in Q1 2025 vs 5.7% in Q1 2024
Lower Current Ratio: 0.79x in Q1 2025 vs 1.74x of Industry Median
Higher Debt to Equity Ratio: 1.55x in Q1 2025 vs 0.03x of Industry Median
Rapidly changing technology, shift in consumer demand, Inflation, Interest rates, etc.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 40.38 | 33.95 | 44.822 | 47.511 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Operational Highlights: In its first full quarter after the AMC divestiture, the company delivered USD 1.27 billion in total revenues, 35% Adjusted EBITDA Margin, and was 15th consecutive quarter of organic cloud revenue growth. Based on this foundation of operational excellence the group continue to invest in its growth and have the capital flexibility to deliver on the Fiscal 2025 Targets.
A new launch: Recently, the company launches New Partner Enterprise Learning Subscription. It is another important investment by the group in its Partner Network and makes it easier for Partners to expand, build and sustain their practices.
An Income Play: The dividend pay-out practice translates into an essential factor for regular income-seeking investors with a long-term horizon. Recently the company declared a quarterly dividend of USD 0.2625 per share, payable on December 20, 2025. Moreover, at the last closing price of CAD 40.38 as on November 20, 2024, the stock offered a healthy dividend yield of 3.615%, which looks decent considering the current macros and interest rates.
Stock might trade at premium to its peers considering decent ARR, improving Gross Profit and operating margin compared to Q1 2024, Higher ROE and other key material business.
Considering the expected valuation upside, decent ARR, improving Gross Profit and operating margin compared to Q1 2024, Higher ROE, other key material business, current trading levels and key business risks a ‘Speculative Buy’ recommendation has been given on the stock at the last closing price of CAD 40.38, as on November 20, 2024.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Technology Industry: Software - Application
| Company | Change (CAD) | Price (CAD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| OTEX Open Text Corp |
-0.01 0.03% | 36.31 | 16.08 | 7.61 | 1.91 | 1.79 | 2.33 | 6.64 |
| SHOP Shopify Inc |
3.74 2.73% | 140.64 | 88.50 | 66.23 | 20.15 | 12.30 | 14.03 | 139.48 |
| CSU Constellation Software Inc. |
10.53 0.23% | 4567.90 | 102.04 | 31.75 | 9.53 | 27.09 | 7.46 | 35.51 |
| DSG Descartes Systems Group Inc |
-0.15 0.10% | 144.72 | 78.26 | 46.08 | 22.68 | 7.55 | 15.90 | 40.44 |
| KXS Kinaxis Inc |
-2.6 1.64% | 156.06 | 166.10 | 36.63 | 10.40 | 8.06 | 6.58 | 67.48 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a medium duration. Recommendations provided in this report are solely based on financial parameters in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels as on November 20, 2024. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Disclaimer :
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