Global Maxfin analyst Garcea raises target on OpenText to $100

OpenText CEO Mark Barrenechea. OpenText (TSX:OTC) has a history of expertly integrating acquisitions, and the pickup of GXS Group is a huge positive, says Global Maxfin Capital analyst Ralph Garcea.

This morning, OpenText announced it plans to acquire Maryland-based based business-to-business cloud integrator GXS Group for (U.S.) $1.16-billion. CEO Mark Barrenechea explained the move.

“The next generation of enterprise software is enterprise information management,” he said. “Today’s GXS announcement strengthens the information exchange pillar with the addition of market-leading cloud-based B2B integration services, it expands the EIM buying centres and it strengthens EIM with the addition of cloud-based managed services. I look forward to welcoming GXS employees, customers and partners to Open Text in the near future.”

Garcea says that with the addition of GXS, OpenText could see fiscal 2015 revenue of $2.15-billion, adjusted EBITDA of $601-million, and adjusted earnings of $6.91.

The Global Maxfin analyst says the pickup of GXS will allow Open Text to combine its Information Exchange portfolio of products that includes Managed File Transfer, Capture and Secure email with GXS’s integration and managed services. He says that the growth of unstructured data in organizations means there is an increasing needs to manage content across multiple platforms. OpenText, he notes, has become a leader because its industry specific solutions are now critical for its Fortune 1000 clients.

In a research update to clients this morning Garcea maintained his BUY rating on OpenText, but increased his one-year price target to $100, up from his previous target of $87.

At press time, share of Open Text on the Nasdaq were up 9.3% to $81.30.

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