Should you sell your OpenText stock?

OpenText (OpenText Stock Quote, Chart, News, Analysts, Financials NASDAQ:OTEX) reported fiscal second-quarter results on Feb. 5 that RBC Capital Markets said were “better than feared,” as cloud bookings growth continued despite ongoing investor skepticism around AI disruption.

As reported by the Globe and Mail in a Feb. 6 note, RBC analyst Paul Treiber trimmed his target price on OpenText to US $30.00 from US $33.00 and maintained a “Sector Perform” rating, citing subdued sentiment rather than fundamentals. The Street average target stands at US $36.50.

OpenText, founded in 1991 and headquartered in Waterloo, Ont., is Canada’s largest enterprise software company, serving roughly 100,000 customers globally with a workforce of about 24,000.

Treiber said OpenText’s valuation has compressed to roughly five times next 12-month earnings, near the low end of its 10-year historical range of five to 16 times and well below peers trading closer to 19 times. He said the company’s plan to step up share buybacks — US $50-million in the quarter — could help support the stock, but added that sentiment will likely hinge on sustained improvement in bookings growth, committed remaining performance obligations and organic revenue trends.

OpenText reported total revenue of US$1.33-billion, down 0.6% year over year, while cloud revenue rose 3.4% to US$478-million, marking the company’s 20th consecutive quarter of cloud organic growth. Quarterly enterprise cloud bookings increased 18% year over year to US$295-million.

Profitability remained solid, with Adjusted EBITDA of US$491-million, representing a 37.0% margin, and GAAP net income of US$168-million, or a 12.7% margin. Non-GAAP diluted EPS was US$1.13. Operating cash flow totaled US$319-million, with free cash flow of US$279-million.

OpenText returned US$119-million to shareholders during the quarter, including US$69-million in dividends and US$50-million in share repurchases.

Interim CEO James McGourlay said the quarter was led by strength in content management cloud offerings and highlighted customer adoption of the company’s Aviator AI solutions. CFO Steve Rai said strong margins and cash generation keep OpenText on track to meet its fiscal 2026 targets, while executive chair P. Thomas Jenkins pointed to continued progress in divesting non-core assets as part of efforts to streamline the business and sharpen its focus on enterprise AI and cloud modernization.

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