HP's Autonomy Takeover Puts Open Text (OTEX) In the Spotlight
Tweet
Share
E-mail
Get Alerts OTEX Hot Sheet
Price: $24.60 --0%
Rating Summary:
9 Buy, 12 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 7 | Down: 5 | New: 23
Rating Summary:
9 Buy, 12 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 7 | Down: 5 | New: 23
Join SI Premium – FREE
Open Text Corp. (Nasdaq: OTEX) is a name investors need to keep an eye on.
Yesterday, shares closed higher in an down tape after HP (NYSE: HPQ) acquired competitor Autonomy plc at a 64 percent premium.
According to analysts at TD Securites, HP paid 11x EV/LTM sales and 24.5x EV/LTM EBITDA. Meanwhile, Open Text trades at at a fraction of that - or 3.1x EV/LTM sales and 11x EBITDA.
Despite this value discrepancy, TD's analyst said the Autonomy deal is only a slight positive. Open Text is only a "loose" comparable to Autonomy and the multiples noted above may not apply to Open Text, the firm said.
The firm has seen and still sees Open Text as a takeover candidate. That said, the HP deal will have little immediate impact on the two companies seen as the most likely suitor for Open Text - SAP (NYSE: SAP) and Oracle (Nasdaq: ORCL) -, according to the analyst.
"EV/maintenance revenue, a statistic which is arguably not meaningful for the Autonomy deal, represents the best metric for potential takeout value," the firm states. "At 7-8x our forecasted F2012 maintenance revenue, in line with the average price paid for comparable software transactions, we estimate a takeout price of $80-$90/share."
The firm is maintaining a Buy rating and $77 price target on Open Text.
Yesterday, shares closed higher in an down tape after HP (NYSE: HPQ) acquired competitor Autonomy plc at a 64 percent premium.
According to analysts at TD Securites, HP paid 11x EV/LTM sales and 24.5x EV/LTM EBITDA. Meanwhile, Open Text trades at at a fraction of that - or 3.1x EV/LTM sales and 11x EBITDA.
Despite this value discrepancy, TD's analyst said the Autonomy deal is only a slight positive. Open Text is only a "loose" comparable to Autonomy and the multiples noted above may not apply to Open Text, the firm said.
The firm has seen and still sees Open Text as a takeover candidate. That said, the HP deal will have little immediate impact on the two companies seen as the most likely suitor for Open Text - SAP (NYSE: SAP) and Oracle (Nasdaq: ORCL) -, according to the analyst.
"EV/maintenance revenue, a statistic which is arguably not meaningful for the Autonomy deal, represents the best metric for potential takeout value," the firm states. "At 7-8x our forecasted F2012 maintenance revenue, in line with the average price paid for comparable software transactions, we estimate a takeout price of $80-$90/share."
The firm is maintaining a Buy rating and $77 price target on Open Text.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Wells Fargo Starts Vivmark Residential (VMRK) at Overweight, 'Setting the mark for growth'
- JPMorgan Downgrades Limbach Holdings (LMB) to Underweight
- JPMorgan Downgrades Bowman Consulting Group Ltd. (BWMN) to Underweight
Create E-mail Alert Related Categories
Analyst Comments, RumorsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
