Analysts unfazed by Open Text's stock price drop

Analysts reacting to the sudden and steep drop in Open Text's (NASDAQ: OTEX) stock price last week were unconcerned about it, attributing it more to the volatile worldwide stock market than anything fundamental about Open Text's viability.

When news broke last Thursday that Open Text failed to meet its expected quarterly profit target, The Financial Post reported that Open Text stock prices plunged as much as 16 percent in early trading.

Looking at the earnings call transcript, however, it appears that Open Text had a pretty good quarter, Wall Street's expectations notwithstanding, with total revenue up 19 percent from a year ago. And this in spite of some strategic purchases it made last quarter.

Perhaps that's why analyst Tony White, president of Ars Logica, saw no reason for concern. 

"While it is true that Open Text missed its earnings number for Q4, the company, its products, and its strategy remain very sound", White said.

He added, "When people realize that Open Text hit its revenue number (or at least came within $500K of a $285.5 million goal), and that three key recent acquisitions put it in a market-leading spot for business process management and mobile ECM potential, events of the last week will appear as a temporary blip of little to no importance," White explained.

Analyst Alan-Pelz Sharpe from Real Story Group agreed. "I am not a financial analyst but I don't see anything to worry about in terms of Open Text stock price, as stock prices around the world have fallen similarly in the last few weeks," he said.

In spite of a lower stock price, neither analyst saw any reason that Open Text would be a bigger takeover target than it was prior to this news.

For more:
- see the earnings call transcript
- see the Open Text press release

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