Artificial intelligence (AI) has emerged as one of the most exciting and disruptive technologies in the last few years, and that seems to be on the path to revolutionizing various industries and sectors. Besides the growing popularity of large language models like OpenAI’s GPT and Google’s Gemini, AI technology broadly has many applications and use cases.
AI and machine learning could be used for optimizing processes, enhancing customer experiences, and generating insights from massive amounts of data. This is one of the key reasons why AI could become a huge market opportunity for companies that can leverage it effectively. According to a report by Precedence Research, Canada’s AI market size was valued at US$43.7 billion in 2022 and is expected to grow at a compound annual growth rate of roughly 19% over the next decade.
A top Canadian AI stock to buy now
One of the Canadian companies that has been investing heavily in AI technology is OpenText (TSX:OTEX), which is best known for its enterprise information management software and cloud services. It currently has a market cap of $11.3 billion as its stock trades at $41.48 per share with nearly 26% year-to-date losses. After the recent declines in its share prices, however, this Canadian AI stock’s annualized dividend yield has risen to 3.3%.
This Waterloo-headquartered software firm helps businesses manage, secure, and extract value from their data and content using various AI-powered solutions. Now, let me explain why OpenText could be one of the best Canadian AI stocks to buy right now.
Top reasons to buy this AI stock in 2024
While OpenText stock has witnessed a sharp downside correction in 2024 so far after rallying by 39% last year, its recent declines don’t seem to completely reflect its long-term growth potential. In the 12 months (ended in March 2024), the tech firm’s total sales jumped 51.4% YoY (year over year) to US$5.9 billion with the help of continued strength in its cloud and annual recurring revenues. Despite challenging macroeconomic environment and inflationary pressures, OpenText registered a strong 28.5% YoY jump in its adjusted earnings during the same period to US$4.10 per share, exceeding Street analyst expectations of US$3.92 per share by a healthy margin.
Besides its solid financial growth trends, another key factor that makes OTEX an amazing long-term growth stock to buy now is its robust portfolio of AI solutions designed for a range of industries and applications.
For example, its Magellan platform utilizes natural language processing, machine learning, and advanced analytics to derive insights and recommendations from both structured and unstructured data. Similarly, the company’s cloud-based Core Experience Insights tool leverages AI to analyze customer behaviour and engagement across digital platforms. Such innovative AI solutions are likely to drive OpenText’s future sales and earnings growth as more businesses adopt digital transformation over the next decade.
Moreover, OpenText’s continued focus on strategic acquisitions, cloud expansion, and returning value to shareholders through share buybacks and dividends make this AI-focused company worth investing in now. Despite all these positive factors, OTEX’s recent declines have also made its stock look undervalued, especially based on its long-term growth potential.
