February 4, 2010 / 8:56 PM / in 8 years

Open Text stock soars on sturdy results

OTTAWA, Feb 4 (Reuters) - Open Text OTC.TO shares soared to a multi-year high on Thursday, as analysts raised their target prices and estimates in the wake of market-beating financial results from the business software maker.

Pent-up demand, cost synergies from a recent acquisition, and a traditionally strong second-quarte all contributed to Open Text’s strong performance, said Paradigm Capital analyst Gabriel Leung.

Open text shares peaked at $45.43 on Nasdaq on Thursday before edging down to $43.68, for a gain of nearly 8 percent. In Toronto, the stock topped at C$48.45 before slipping to C$46.78, up 8.7 percent.

That marks a new high since at least 2000, according to available Reuters data. Open Text was not immediately available to confirm if it was an all-time high for the stock, which was listed on Nasdaq in 1996 and on the TSX in 1998.

Open Text posted adjusted earnings per share of 87 cents on revenue of $247.8 million after markets closed on Wednesday, well ahead of consensus profit estimates of 69 cents a share and C$229.9 million in sales.

The company told analysts it was “comfortable” with forecasts for the third and fourth quarters.

On average, analysts expect a profit of 73 cents a share on revenue of $229 million in the third quarter, and a profit of 85 cents a share on sales of $247.5 million in the fourth, according to Thomson Reuters I/B/E/S.

“We believe the company is erring on the conservative side ... until it records a couple more quarters of solid results, particularly in the U.S.,” Leung said in a note, which lifted his stock target to $52 from $46 and raised his revenue and profit estimates for 2010 and 2011.

Despite the cautious tone, management discussed new projects, improved deal flow and stronger relationships with partners SAP, Oracle and Microsoft, said Dundee Securities analyst Dushan Batrovic.

The cautious forecast likely factors in the potential for delayed orders should the economic recovery stumble, he added.

“We believe this approach is prudent and should set the stage for further upside for 2010,” he said in a note.

Batrovic raised his stock target to $54 from $50 and increased his profit and revenue estimates for 2010 and 2011. ($1=$1.07 Canadian) (Reporting by Susan Taylor; editing by Rob Wilson)

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