While the broader markets are trading near all-time highs, several TSX tech stocks are priced at a discount to consensus price targets. One such Canadian stock is Open Text (TSX:OTEX), with a market cap of $7.7 billion.
Open Text has underperformed its peers in recent years and is down almost 40% from its all-time highs. The ongoing pullback has meant OTEX stock has returned 61% to shareholders over the past decade, even if adjusted for dividend reinvestments.
However, the drawdown allows shareholders to buy the dip and gain exposure to a company that offers a dividend yield of 3.5%.
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Is the Canadian tech stock a good buy?
OpenText Corporation develops and sells information management software and cloud solutions globally.
The company offers software-as-a-service, APIs (application programming interfaces), hosted services, and packaged business applications, including content management, cybersecurity, DevOps, analytics, and AI services. Revenue streams include cloud subscriptions, software licensing, consulting, training, and managed services.
OpenText maintains strategic partnerships with SAP, Google Cloud, AWS, Microsoft, Oracle, and Salesforce, as well as systems integrators such as Accenture and Deloitte. The company serves enterprise organizations, government agencies, and mid-market businesses worldwide.
In fiscal Q1 of 2026 (ended in September):
- Open Text reported revenue of US$1.3 billion, an increase of 1.5% year over year, as cloud sales rose 6% to US$485 million.
- The standout performance came from Open Text’s Content business, which represents roughly 40% of total revenue and saw cloud growth accelerate to 21% year over year.
- That marks a significant jump from the 17% cloud growth rate the division posted last year.
- The company’s current remaining performance obligations, a key metric for future cloud revenue, increased 6% year over year, while long-term cloud RPO surged 16%.
Executive Chair Tom Jenkins has outlined a clear strategy to divest 15% to 20% of the company’s revenue by selling non-core business units.
The goal is to focus exclusively on content that trains agentic AI systems. Open Text already sold its eDOCS business and plans to shed one additional unit per quarter over the next three quarters. Jenkins emphasized that the pace of divestitures reflects operational caution rather than market demand constraints.
The company’s positioning in AI stems from its vast library of data connectors built over 35 years. Open Text maintains over 1,500 connectors to legacy and current enterprise systems, providing access to content behind corporate firewalls that public AI models cannot reach. A recent MIT study found that 95% of early enterprise AI projects failed primarily due to insufficient training content.
New CFO Steve Rai, who joined in October from BlackBerry, signalled that customers are accelerating their cloud migrations faster than anticipated.
This shift creates a revenue recognition timing issue, in which license revenue declines in the near term but is replaced by larger recurring cloud contracts. The company expects to convert each dollar of maintenance revenue into two dollars of cloud revenue.
Open Text closed 33 deals exceeding US$1 million in the first quarter, up 43% year over year. The company maintained its full-year fiscal 2026 outlook even as Q2 revenue guidance came in below estimates.
What is the OTEX stock price target?
Analysts forecast revenue to increase from US$5.17 billion in fiscal 2025 to $US5.37 billion in fiscal 2028. In this period, adjusted earnings per share are forecast to expand from US$3.82 to US$4.77.
OTEX stock trades at a forward earnings multiple of 7.4 times, which is below its 10-year average of 12.1 times. At the current multiple, it could gain 15% over the next 18 months. If we adjust for dividends, cumulative returns could be closer to 20%.
Bay Street remains bullish on the Canadian tech stock and forecasts a 30% surge from current levels.
