In a strategic shift towards cloud and Artificial Intelligence (AI), OpenText (NASDAQ:OTEX)(TSE:OTEX) announced the divestiture of its Application Modernization and Connectivity (AMC) business to Rocket Software. The deal will fetch $2.275 billion in cash for OpenText, which provides information management solutions via its cloud-based software platform.
The divestiture will enable OpenText to expand its Cloud and AI businesses, which will result in generating more predictable growth. Furthermore, the deal will allow OpenText to deleverage its balance sheet by accelerating debt repayment.
OpenText’s CEO & CTO Mark J. Barrenechea said that the company’s decision to divest the mainframe business aligns with its goal of focusing exclusively on the significant opportunities presented by Cloud and AI in Information Management. He added that this move will help the company bolster organic growth and fortify its financial position to meet deleveraging targets ahead of schedule. Also, it restores capital flexibility, potentially enabling future share buybacks.
With this backdrop, let’s look at what the Street recommends for OTEX stock.
What is the Price Prediction for OTEX?
OTEX stock has gained about 37% year-to-date. Moreover, analysts’ average price target suggests further upside potential. The company had a solid start for Fiscal 2024, with its Q1 revenue registering a year-over-year growth of 67.3%. What stood out was the double-digit cloud revenue growth. Moreover, its quarterly enterprise cloud bookings improved 8.2% year-over-year.
With four Buy and one Hold recommendations, OTEX stock has a Strong Buy consensus rating. Further, analysts’ average OTEX stock price target of $46.60 implies 15.52% upside potential from current levels.
