So, you missed out on Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) stock and are wondering if you’ll ever get a second chance to invest in the artificial intelligence (AI) revolution. The good news is that while Alphabet stock has been a dominant player, it’s not the only company making significant strides in AI.
In fact, there’s one Canadian company quietly building a strong foundation in AI and enterprise data management. That’s OpenText (TSX:OTEX). If you’re looking for an AI-driven stock to buy and hold for the long term, OpenText may be your best bet.
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Why OpenText?
Headquartered in Waterloo, Ont., OpenText is Canada’s leading enterprise information management company. While it may not have Google’s household name recognition, it does help Google manage its data. In today’s digital world, where AI is transforming industries, OpenText is positioned at the forefront, helping companies leverage AI-powered tools for automation, security, and business intelligence.
OpenText isn’t just integrating AI into its products. It’s actively shaping the future of enterprise AI. A major part of its growth strategy is OpenText Aviator, a suite of AI-powered tools designed to enhance business operations. The Aviator suite includes an AI-powered conversational search for enhanced customer service and enterprise knowledge retrieval. It has predictive analytics to help companies forecast trends and automate decision-making. Plus, it has generative AI solutions that assist in content creation and knowledge management
These AI-powered solutions are designed to streamline workflows, improve cybersecurity, and help companies gain valuable insights from their data. Unlike Google, which focuses on consumer AI and search algorithms, OpenText is focused on enterprise applications. Helping businesses manage information in a way that improves efficiency and reduces risk.
More to come
One of OpenText’s strongest growth strategies has been through acquisitions. In early 2023, OpenText completed a $5.8 billion acquisition of Micro Focus, a U.K.-based software company that specializes in IT automation and data analytics. This acquisition has significantly expanded OpenText’s AI and cybersecurity offerings.
One of the key reasons investors should consider OpenText as a long-term AI stock is its financial stability and steady growth trajectory. Unlike high-risk AI startups that are burning cash, OpenText is a well-established, profitable company.
The company has a market capitalization of $11.57 billion and a forward price-to-earnings (P/E) ratio of 8.16 at writing, making it a relatively affordable investment compared to high-flying AI stocks like Google. OpenText also has a strong cash flow, with levered free cash flow of $928 million. Therefore, it generates significant profits even after capital expenditures.
Additionally, OpenText is a dividend-paying stock with a forward annual dividend yield of 3.49%. This makes it an attractive choice for long-term investors who want exposure to AI while also benefiting from stable income.
Stand out choice
Google may dominate AI in the consumer space, but OpenText is carving out a niche in the enterprise AI sector. Here’s why OpenText might be the better pick for long-term investors. While Google focuses on AI for search, advertising, and cloud services, OpenText specializes in AI-driven solutions for businesses, helping companies manage and secure their data.
Plus, OpenText is a leader in enterprise data security, an area where AI is becoming increasingly important. With growing concerns over cyber threats, OpenText’s AI-powered security solutions make it a compelling investment. OpenText’s stock is trading at a lower valuation than many of the big AI names, providing an opportunity for investors to get in at a reasonable price. And unlike Google, OpenText pays a dividend, making it a more attractive option for income-focused investors.
Future outlook
Looking ahead, OpenText is focused on expanding its AI-driven cloud services and continuing to integrate its recent acquisitions. The AI stock’s management has set aggressive targets for the next few years, with plans to grow its cloud business, enhance AI capabilities, and strengthen its cybersecurity offerings.
With AI adoption expected to accelerate across industries, OpenText is well-positioned to capitalize on the enterprise shift towards AI-powered solutions. As more businesses look for ways to automate processes, improve security, and manage data efficiently, OpenText’s services will become increasingly valuable.
