OpenText upgraded at National Bank

National Bank Financial Capital Markets analyst Richard Tse upgraded OpenText (Open Text Stock Quote, Chart, News, Analysts, Financials NASDAQ:OTEX) to “Outperform” from “Sector Perform” in a Sept. 12 report, raising his target price to $45.00 from $34.00

“We believe there’s a renewed investment opportunity in what had been an orphaned name,” Tse said after meeting with OpenText Executive Chair and Chief Strategy Officer Tom Jenkins and investors.

He described the opportunity in two stages: near-term catalysts that could simplify and strengthen the story, and a longer-term valuation re-rating tied to AI. “It’s this second stage that’s the most exciting as it offers the potential for a material valuation re-rating in the name longer term.”

Founded in 1991 and based in Waterloo, Ont., OpenText is Canada’s largest enterprise software company. It provides information management solutions to about 100,000 global customers with a workforce of roughly 24,000.

Short term, Tse identified several catalysts over the next six months. The company is preparing to divest non-core businesses, including parts of its cybersecurity, analytics and application automation units. He estimates these moves could cut revenue by 20%–25% but reduce leverage from 2.8 times to 2.1 times, while focusing OpenText on data and AI opportunities.

Leadership turnover is another driver. Most of the board is expected to change within a year, with searches underway for a new CEO and CFO. Investors have welcomed the transition, which Tse believes should support a re-rating.

Finally, the upcoming annual user conference in November is expected to highlight growing AI adoption in OpenText’s content management suite. Content Cloud revenue rose 17% last year, with about two-thirds attributed to AI.

Longer term, Tse believes opportunity lies with artificial intelligence.

OpenText has completed about 300 acquisitions in 25 years to consolidate its position in enterprise content management. While rivals like Microsoft SharePoint compete in the ~$50-billion ECM market, OpenText maintains a lead in large enterprise, reinforced by its SAP partnership.

“To be clear, we don’t believe OpenText is a pure-play AI company, but that does not mean it cannot be a beneficiary of AI, as we’ve seen with other names,” he said. “In our view, OpenText’s potential comes from its ability to monetize the vast amounts of unstructured data it manages across its 120K+ enterprise customers.”

He pointed to Salesforce’s US$8.2-billion acquisition bid for Informatica as evidence of how AI is reshaping valuations in the data space.

“Bottom line, we think this is where there’s growing potential to see a material valuation re-rating.”

Tse forecasts Adjusted EBITDA of $1.86-billion on $5.24-billion in revenue for fiscal 2026, improving to $2.02-billion on $5.43-billion in fiscal 2027.

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