3 Reasons to Buy Open Text Stock Like There’s No Tomorrow

Here are the top three reasons why you may want to consider OpenText stock right now and hold it for the long term.

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Unlike many Canadian growth stocks, Open Text (TSX:OTEX) is underperforming the broader market this year. Even as the TSX Composite is hovering near its record highs above 25,000, OTEX stock is down 27% year to date, trading at $40.67 per share with a market cap of $10.8 billion.

Open Text stock’s recent underperformance might seem like a red flag to some. But for those who look deeper, it could actually represent a great buying opportunity. The company’s strong fundamentals, expanding global reach, and robust outlook suggest that the recent dip is more of a short-term fluctuation than a long-term setback. In this article, I’ll give you three reasons why buying OTEX now could pay off handsomely in the future.

Consistent cloud demand driving financial growth

If you don’t know it already, Open Text mainly focuses on providing enterprise information management solutions to help businesses organize, secure, and analyze large volumes of data. Its product offerings cover several areas, including content management, cybersecurity, data integration, and cloud services.

Despite the recent drop in its share price, Open Text’s financial performance remains robust. In the first quarter (ended in September) of its fiscal year 2025, the Waterloo-based information management firm reported revenue of US$1.27 billion, marking its 15th consecutive quarter of organic growth in cloud services.

While its total revenue declined by 11% YoY (year over year) due mainly to its divestiture from the Application Modernization and Connectivity business, its cloud revenues still grew by 1.3% YoY to US$457 million. Even as the competition in the information management market continues to grow, this growth in its cloud services revenue reflects Open Text’s shift towards a more subscription-based model, which could provide the company with a steady, recurring revenue base.

Returning value to shareholders

Another key reason to consider investing in Open Text is the company’s clear commitment to returning capital to shareholders through dividends and share buybacks. In the September quarter alone, it returned around US$154 million to shareholders through dividends and share repurchases. This included US$69 million in dividends and an additional US$85 million spent on share buybacks, with a plan to repurchase up to US$300 million worth of shares under its fiscal 2025 repurchase plan.

At the current market price, Open Text stock offers a 3.6% annualized dividend yield and distributes its dividend payouts every quarter.

Focus on AI and security could drive future growth

Interestingly, Open Text is actively investing in new technologies that are set to shape the future of the tech industry. Earlier this year, at the Open Text World User Conference, the company highlighted its innovation roadmap, focusing on artificial intelligence or AI-driven solutions and cybersecurity enhancements. Open Text’s integration of AI into its product portfolio, especially in areas like DevSecOps (development, security, and operations), demonstrates its strategic commitment to staying ahead of emerging tech trends.

For example, Open Text is using AI to enhance its DevSecOps offerings, which is crucial for companies looking to build secure applications without compromising on speed. The company is leveraging AI to create proactive, intelligent security solutions that integrate seamlessly into the development pipeline. These proactive, growth-oriented steps further brighten Open Text’s long-term outlook.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Jitendra Parashar has positions in Open Text. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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