UPDATE: Credit Suisse Downgrades Open Text Following Another License Miss

In a report published Wednesday, Credit Suisse analyst Michael Nemeroff downgraded the rating on Open Text Corporation (NASDAQ: OTEX) from Outperform to Neutral, and lowered the price target from $65.00 to $60.00.

In the report, Credit Suisse noted, “Following a small license miss last quarter, OTEX reported another organic license revenue decline in F2Q15 (-6.7%) causing us to downgrade its shares as our previous expectation for organic license growth of +8.5% in F2015 was likely too high; we believe investors will not pay as high a multiple for OTEX shares if the company is unable to grow organic license revenue anywhere near the industry growth rate, which OTEX mgmt has previously pegged at ~+10%, or at all. We recognize that the FX revenue headwind in F2Q was out of the company's control, but the sales execution issues OTEX faced in emerging market geographies in F2Q are likely to persist for at least another few qtrs due to a weakening global macroeconomic outlook. That, coupled with a tough +23% yr/yr organic license revenue comp coming in FQ4 causes us to lower our F2015 organic license revenue growth forecast to -1%. Despite the license shortfalls the company continues to manufacture EPS, which is impressive, but not as coveted as organic, in our view. Neutral.”

Open Text closed on Tuesday at $59.59.