Q: In their quarterly report today, which seemed very good to me, OTEX said:
OpenText is at the forefront of Enterprise Information Management for AI, and at our recent OpenText World conference, our customers and partners demonstrated on the main stage how they leverage our Aviator AI solutions to solve complex problems, bringing insights, security and compliance to their information and most sensitive data.
If this is true, and OTEX will benefit from AI, why has it dropped about 30% in the last few weeks on the AI Eats Software Companies' Lunch trade? This makes no sense to me, so I've been averaging down. The National Bank analyst, Richard Tse, reiterated his outperform rating in a post-earnings report entitled Still Like the Setup. Do you agree with Richard and I that Mr. Market is perhaps mistaken in its punishment of the stock?
OpenText is at the forefront of Enterprise Information Management for AI, and at our recent OpenText World conference, our customers and partners demonstrated on the main stage how they leverage our Aviator AI solutions to solve complex problems, bringing insights, security and compliance to their information and most sensitive data.
If this is true, and OTEX will benefit from AI, why has it dropped about 30% in the last few weeks on the AI Eats Software Companies' Lunch trade? This makes no sense to me, so I've been averaging down. The National Bank analyst, Richard Tse, reiterated his outperform rating in a post-earnings report entitled Still Like the Setup. Do you agree with Richard and I that Mr. Market is perhaps mistaken in its punishment of the stock?
5i Research Answer:
Please also review our prior comments. OTEX is a very very cheap stock, but there are risks (including debt and strategy). The AI-eats-software sentiment was very strong, and not overly rational. But, certainly some companies are going to see business cannibalized. But it is simply too early to see who will win and who will lose. 'Data' and close knowledge of customers will be very important, and OTEX indicates it has these. But it is still a relatively small company with a not-perfect history, and negative momentum. Unfortunately, rational thought and fundamentals do not always win in the stock market.