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Why Open Text Corporation Shares Popped Today

By Brian D. Pacampara, CFA - Feb 10, 2016 at 11:17AM

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The software provider surprised Wall Street with a strong quarter. But will the rebound last?

What: Shares of information management technologist Open Text Corporation (OTEX 1.14%) were up 10.3% at 10:55 a.m. ET on Wednesday after its quarterly results topped Wall Street expectations.

So what: Open Text stock has slumped over the past year on concerns surrounding the enterprise cloud computing space, but strong Q3 earnings -- adjusted EPS of $1.01 topped the consensus estimate of $0.11 -- coupled with positive management comments are quickly easing some of those worries. In fact, revenue grew 6% over the year-ago period in constant currency while non-GAAP operating margin increased 420 basis points, reigniting positive vibes over Open Text's growth prospects and competitive position going forward.

Now what: Management said that its next-generation Release 16 platform remains right on schedule for general availability. "Release 16 is the world's first digital platform, and we plan on making strategic investments in the coming quarters to enable our install-base, new customers and partners to fully capture the power of our next generation platform," said CEO and CTO Mark J. Barrenechea. "We remain strategically focused on customer-driven innovation, leadership in our key markets, profitable organic growth, acquisitions, cash flow expansion, and operating excellence." Of course, with the stock still off about 25% from its 52-week highs, Wall Street still needs plenty of convincing that management can deliver on that bullishness. 

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