OpenText downgraded to Sector Perform from Outperform at RBC Capital

RBC Capital analyst Paul Treiber downgraded OpenText (OTEX) to Sector Perform from Outperform with a price target of $33, down from $45. The firm says its prior investment thesis assumed a valuation re-rating as OpenText stabilized Micro Focus, achieved positive organic growth and increased free cash flow. However, the 11% decline in OpenText’s shares post earnings shows that the market is “increasingly critical of gaps between actual and expected growth,” the analyst tells investors in a research note. With likely continued quarterly variability and a “high bar” for future organic growth, RBC now assumes OpenText’s valuation multiple is unlikely to materially change.