Open Text Shares Jump 17% on Earnings Beat: Analysts Disagree On Outlook

Shares of Open Text Corp. (OTEX) jumped to their highest level in more than two years on Friday morning, following the company’s second quarter earnings that came in ahead of consensus estimates.

The Waterloo, Ont.-based business software maker’s stock has recovered well following a huge sell-off last spring, when the company’s weak results and forecast wiped off as much as 20% of their value in one day.

This past quarter marked the first that included numbers from rival Hummingbird Ltd., which Open Text paid roughly US$489-million for in a deal that closed in October.

Clarus Securities analyst Blair Abernethy said in a research note that the integration of Hummingbird appears to be on track, while the speed and extent of Open Text’s cost-cutting drove earnings per share well above his expectations.

He raised his price target on Open Text shares to US$24 from US$23 and upgraded his recommendation to “buy” from “accumulate.”

Meanwhile, Merrill Lynch analyst Edward Maguire reiterated his “sell” rating on Open Text shares, citing a lack of detailed information on the company’s specific operational segments, including Hummingbird’s connectivity business.

Open Text’s cost-cutting measures appear to be working and the prospect of private equity interest could serve to limit the downside for Open Text shares, he said in a research note.

However, Mr. Maguire recommends selling the stock until its combination with Hummingbird shows further signs of succeeding.

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