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OpenText is due for a pullback, Kim Bolton says

OpenText
Kim Bolton

OpenText (OpenText News, Stock Quote, Chart TSX:OTEX) has been on a heck of a run so far in 2019 but investors should still be able to buy it on the dip sometime before the year is out, according to Kim Bolton of Black Swan Dexteritas.

“We don’t own it but we follow it,” says Bolton, founder and portfolio manager for Black Swan, in conversation with BNN Bloomberg on Monday. “It’s in Software as a Service and doing consulting and providing services for enterprise integration in various things all the way from the cloud to single software services. It’s one of the leaders here in Canada.”

“It’s pricey up here. I’d recommend that if you can get it in the mid-C$40s, that would be the place to buy it —and I think that you’ll get a chance this year,” he says.

After having an up-and-down year in 2018, OTEX has powered out of the gate this year, climbing 27 per cent since January 1. Over the longer haul, the stock has been a perennial winner, gaining 300 per cent in value since early 2013. That’s while paying out a modest dividend, as well — a rarity in the tech field.

Historically a growth by acquisition story, OpenText has made a pair of notable partnerships recently, teaming up with Alphabet’s G Suite brand applications and with Mastercard on payments and financing in the automotive supply chain.

Ahead of OTEX’s fiscal fourth quarter 2019, due on August 1 after market close, the company generated solid numbers in its Q3 in May, coming in with revenues of $719 million, a five-per-cent year-over-year increase, adjusted EBITDA of $261.8 million, a 15-per-cent jump over the previous Q3, and EPS of $0.64 per share. Analysts were expecting $0.60 per share. (All figures in US dollars unless noted otherwise.)

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