Inside the Market’s roundup of some of today’s key analyst actions

National Bank Financial analyst Richard Tse raised his rating for Open Text Corp. (OTEX-Q, OTEX-T) to “outperform” from “sector perform” after hosting investor meetings with Executive Chair and Chief Strategy Officer Tom Jenkins, seeing “a renewed investment opportunity in what had been an orphaned name.”

“That investment opportunity comes in two stages – the first is in the short term where we believe the next 3 – 6 months will be catalyst-rich, bringing renewed attention to the name while making it a compelling and easier to understand, developing growth story,“ he said. ”That should also drive a commensurate valuation re-rating in the Company’s shares. The second stage is what we believe is a quietly developing AI play from an unassuming leader in enterprise data via the Company’s long-standing core strength in content management. It’s this second stage that’s the most exciting as it offers the potential for a material valuation re-rating in the name longer term.”

In a client note titled Pivot into Opportunity, Mr. Tse said he sees multiple catalysts for a re-rating of the Waterloo, Ont.-based software company’s shares in short-term, including the divestiture of non-core assets.

“While that’s positive, we think the bigger benefit comes from the qualitative – simplifying the story and allowing the Company to focus on a material pivot towards monetizing its data position in AI,” he said.

“With OpenText’s upcoming annual user conference in November, we expect to hear an increasing uptake in the Company’s AI deployments from customers using its content management products and services. In what may be surprising to many investors, Open Text’s oldest product category of Content is where it’s seeing the most growth. In a recent investor slide, Open Text highlighted that Content Cloud revenue was up 17 per cent year-over-year in FY25; we believe approximately two-thirds was attributed to AI.”

However, it is in the long term where the company “could get really interesting,” according to Mr. Tse.

“Having covered OpenText from an equity research lens for close to 25 years, in that time, we’ve seen virtually every single acquisition the Company has undertaken in the market,” he explained. “Collectively, OpenText has completed around 300 acquisitions towards becoming a leader in the Enterprise Content Management (ECM) space, relative to others, notably, while we include Microsoft (SharePoint) in this $50-billion ECM market, OpenText holds a relative lead in large enterprise as validated by its partnership with SAP. We think the above preamble is important to understanding OpenText’s aspirations around AI.

“To be clear, we don’t believe OpenText is a pure-play AI company, but that does not mean it cannot be a beneficiary of AI, as we’ve seen with other names. In our view, OpenText’s potential comes from its ability to monetize the vast amounts of unstructured data it manages across its 120K+ enterprise customers. The thesis is quite simply that enterprises want to utilize their data securely, which is what OpenText has done for years around its core offering today – serving data securely to customers, so they can better execute on their business processes. However, going forward, we think it is inevitable that (all) enterprises will be looking to utilize their data via AI (including agents) with OpenText sitting in the cross-hairs of that opportunity. Bottom line, while early in this developing thesis, we’d note recent actions in the market, such as Salesforce’s bid to acquire Informatica for an EV of $8.2-billion (4.7 times NTM [next 12-month] Sales and 13.9 times NTM EBITDA), appear to provide reasonable validation of the data opportunity. Of note, it’s broadly viewed that Salesforce is acquiring Informatica to strengthen its data foundation for AI (clean, integrated, catalogued, and managed data). In our view, OpenText is differentiated given its focus and specialization in unstructured data. Bottom line, we think this is where there’s growing potential to see a material valuation re-rating; interestingly, if we were to ascribe the valuation from the Informatica transaction to our OpenText ‘Post-Divestitures’ financial profile, the implied share price would be $65.”

Mr. Tse raised his target for Open Text’s Nasdaq-listed shares to US$45 from US$34.  The average target on the Street is US$35.47, according to LSEG data.

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In reaction to recent share price appreciation, Desjardins Securities analyst Lorne Kalmar moved Allied Properties Real Estate Investment Trust (AP.UN-T) to “sell” from “hold” previously, believing it now “looks expensive.”

“Following AP’s strong unit price performance since July 31 and the negative 4-per-cent total return to our target, we are moving our recommendation to Sell,” he said. “While we acknowledge the improving sentiment around the office sector, in our view, AP’s current valuation screens expensive, particularly on P/NAV and implied cap rate, and does not appropriately reflect either the current state of the office market or some of the potential headwinds the REIT could face over the next 12–18 months.”

Mr. Kalmar thinks the Toronto-based REIT’s re-rating has been “driven by sentiment and ignores several important realities.”

“The first is that we do not expect AP to participate meaningfully in the initial phases of the office market recovery, which is being driven by bank RTO mandates, primarily in Toronto (2 million square feet, or 2 per cent of downtown Toronto inventory), he explained. ”We only expect AP’s portfolio to begin to meaningfully recover once there is a rebound in office-using employment and the economic outlook, and Class A vacancy declines to the single digits (2Q25: 17.0 per cent).

“We also have concerns around AP’s ability to meet its 90-per-cent occupancy target by year-end, as well as the recoverability of the $234-million loan on 150 West Georgia and the timing of KING Toronto’s completion, both of which could impact leverage reduction (ND/EBITDA: 11.9 times). We would reconsider our rating on a pullback in the unit price, evidence to support expectations for a recovery of the REIT’s portfolio fundamentals and/or private market support for the current valuation.”

Seeing its current valuation “not rooted in reality,” Mr. Kalmar maintained an $18 target for Allied units. The current average is $18.22.

“While we acknowledge the improving sentiment around the office sector, in our view, AP’s current valuation screens expensive, particularly on P/NAV and implied cap rate, and does not appropriately reflect either the current state of the office market or some of the potential headwinds the REIT could face over the next 12–18 months,” he said.

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Ahead of the release of its third-quarter results on Sept. 24, Desjardins Securities analyst Gary Ho thinks “scarcity value with accelerated buybacks should drive better valuation” for AGF Management Ltd. (AGF.B-T)

“Industry flows have seen an improvement while strong markets boost investors’ confidence,” he said. “We updated our model to reflect higher AUM [assets under management] driving our upwardly revised adjusted EPS estimate of $0.44 (consensus C$0.42). Recent M&A transactions and scarcity value bode well for AGF’s valuation while its increased NCIB activity provides share price support.”

Mr. Ho’s new EPS forecast of 44 cents is 3 cents higher than his previous expectation, driven by a higher projection for its Wealth Management business.

“Key themes include: (1) Retail net flows of $44-million. Industry trends (per SIMA) have been recovering, which is not a huge surprise given the strong markets over the past months. June, July and preliminary August long-term fund net inflows total $10-billion, led mostly by conservative categories such as fixed income ($5.2-billion), with equity funds seeing slight net outflows in June and July. We forecast $44-million in net inflows in 3Q (more bullish vs AGF’s flattish flows from its last call) and expect continued success in the SMA build-out (not in retail flow numbers). SMA/ETF AUM increased 54 per cent year-over-year to $2.8-billion in 2Q25. Fund performance should hold in well. While 50 per cent of strategies outperformed peers on a three- and five-year basis in 2Q, its three-year percentile deteriorated to 51 per cent vs 44 per cent at 1Q. (2) Forecast 3Q SG&A expense of $61.5-million. We model $246-million for FY25, roughly in line with guidance of $245-million. Our FY26 and FY27 SG&A estimates imply 3.5-per-cent growth per year. (3) Alt asset contribution. We expect private alt FV gains of $7.8-million. AGF targets an 8–10-per-cent return on its alt investments (but has been trending above this threshold). We will look for AGF’s intentions to increase its 25-per-cent New Holland stake in the near term. (4) Share buybacks. AGF has been very active with its NCIB, with 643,700 shares repurchased for $8-million and an additional 0.4 million shares ($4.6-milion) under its EBT. This marks its fastest pace since its 2022 SIB,” the analyst said.

Reiterating his “buy” recommendation for AGF shares, Mr. Ho raised his target to $16.50 from $15 after increasing his earnings expectations through fiscal 2026. The average on the Street is $14.40.

“We foresee a few near- or medium-term positive catalysts: (1) retail net flows trending at or above industry; (2) redeployment of capital for organic growth to seed new private alt strategies and for share buybacks; (3) growth in fees/earnings from its private alt platform; and (4) M&A should be EPS-accretive.”

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In other analyst actions:

* BMO’s Jeremy McCrea upgraded Parex Resources Inc. (PXT-T) to “outperform” from “market perform” with a $20 target, rising from $16 and exceeding the $17.96 average on the Street.

* Telsey Advisory Group’s Dana Telsey downgraded Lululemon Athletica Inc. (LULU-Q) to “market perform” from “outperform” with a US$200 target, down from US$360 and below the US$211.40 average.

* In response to its takeover by Royal Gold Corp., CIBC’s Cosmos Chiu lowered Sandstorm Gold Ltd. (SSL-T) to “tender” from “neutral” with a $16.50 target, rising from $13.50 and above the $14.51 average on the Street.