The introduction of new data privacy rules may be a positive for OpenText (TSX:OTC, Nasdaq:OTEX), says Industrial Alliance Securities analyst Blair Abernethy.
On May 25, the General Data Protection Regulation (GDPR) will come into effect across Europe. The GDPR, which was adopted in 2016, will replace the 1995 Data Protection Directive, and aims to give more control to users over their personal data.
Abernethy says this, along with the high profile data privacy issues being raised in the United States, could be a positive for OpenText, though the analyst cautions against expecting an instant windfall, or “big bang” effect, because many companies have been preparing for GDPR.
“OpenText customers use its enterprise content management platform to aid in the handling of unstructured data, such as emails, contracts and other consumer-related documents not typically captured by and ERP system,” he notes. “We expect that many OpenText consumer-facing enterprises preparing for GDPR will be looking for methods to quickly and cheaply locate, collect together and delete consumer records from a variety of enterprise IT systems. We believe that this could include a review and potentially expanded use of customer records, management applications, search and e-Discovery tools and information archiving systems.”
In a research update to clients today, Abernethy maintained his “Buy” rating and one-year price target of (U.S.) $41.00 on OpenText, implying a return of 20.2 per cent at the time of publication, including dividend.
Abernethy thinks OpenText will generate EBITDA of (U.S.) $1.02-billion on revenue of $2.81-billion in fiscal 2018. He expects those numbers will improve to EBITDA of $1.06-billion on a topline of $2.86-billion the following year.