1 Reeling Tech Stock Just Released its Earnings: Should You Buy Today?

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The S&P/TSX Composite Index was down nearly 550 points in early afternoon trading on May 5. Meanwhile, Canada’s technology space had suffered the worst losses of the day at the time of this writing. The S&P/TSX Capped Information Technology Index was down 6.5% at the bottom of the noon hour. Canadian tech stocks were a fantastic source of growth as the bull market pressed forward in the face of the COVID-19 pandemic. That said, there have been warnings that rising interest rates and general monetary tightening could halt this momentum.

Today, I want to zero in on one struggling tech stock that just unveiled its recent batch of earnings. Let’s jump in.

This top tech stock has struggled out of the gate in 2022

Open Text (TSX:OTEX)(NASDAQ:OTEX) is Waterloo-based company that is engaged in the design, development, marketing, and sale of information management software and solutions. Shares of this tech stock have dropped 17% in 2022. This has pushed the tech stock into negative territory in the year-over-year period. I’d suggested that investors snatch up Open Text all the way back in 2017.

This tech stock has proven to be a very reliable source of growth over the past decade. It reached an all-time high of $69.79 per share in the late summer of 2021. The stock has steadily fallen since it delivered on that milestone. Should investors be eager to buy the dip?

Should investors feel better about Open Text’s chances after its earnings release?

The company released its third-quarter fiscal 2022 earnings after markets closed on May 4. It reported total revenues of $882 million — up 5.9% from the previous year. Meanwhile, annual recurring revenues increased 6.2% to $734 million. Moreover, free cash flows jumped 508% to $306 million.

In the year-to-date period, total revenues climbed 4% from the same period in fiscal 2021 to $2.59 billion. Meanwhile, it reported adjusted EBITDA of $951 million — down 4.9% from the previous year. Operating cash flows also increased 25% to $729 million.

Open Text has maintained strong cloud bookings in the face of a volatile economic environment. The company has been powered by aggressive acquisitions in recent years. It delivered on several exciting customer wins in the third quarter of fiscal 2022, including Bank of France, Booz Allen Hamilton, Enedis, and Lids Sports Group and Scale Computing. These promising acquisitions should fuel future revenue and earnings growth for Open Text.

Open Text: Should you buy or sell this tech stock today?

This reeling tech stock still has nice potential to deliver on strong growth in the long term. Shares of Open Text possess a favourable price-to-earnings ratio of 21 at the time of this writing. The stock last had an RSI of 36, which puts this tech stock just outside of technically oversold territory. This company is still geared up for strong earnings growth going forward. Investors should keep an eye on Open Text in this extremely volatile market.

The post 1 Reeling Tech Stock Just Released its Earnings: Should You Buy Today? appeared first on The Motley Fool Canada.

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Fool contributor Ambrose O’Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends OPEN TEXT CORP.

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