Opera Reports Beat And Raise Performance As Growth Accelerates - Reiterate Buy

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OPRA's FQ3'24 performance hints at the potential growth acceleration from H1'24 levels, thanks to its improved monetization in Western regions.This is on top of the recently refreshed Opera One for ...

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This was on top of the improved monetization from the Western regions, as observed in the growing user share and higher ARPUs, with it contributing to the growth flywheel across its advertising and search revenues, as the management raised its FY2024 guidance. OPRA YTD Stock Price TradingView Since then, OPRA has had a near vertical rally of +21.8%, compared to the wider market at +1.8%, as the robust FQ3'24 numbers build upon the promising H1'24 performance. For reference, the browser company reported total FQ3'24 revenues of $123.21M (+12.2% QoQ/ +20% YoY) and adj EPS of $0.26 (+18.1% QoQ/ +36.8% YoY), accelerating from H1'24 levels of +16.7% YoY and +21.8% YoY, respectively. Much of OPRA's top-line outperformance is attributed to its highly successful pivot to Western regions, with a robust +51% growth in MAU to 51M across the North American and the EU regions between Q3'20 and Q3'24. This development has already triggered the record high annualized ARPUs of $1.66 (+13.6% QoQ/ +26.7% YoY/ ~ 4x over the past four years), despite the lower average MAU at 296M (-2M QoQ/ -15M YoY). This also builds upon OPRA's niche game-oriented browser, GX, currently reporting a robust ~8% in global market share, with a +600% growth in MAU to 32M over the past four years and an annualized ARPU of $3.68 (+12% sequentially). If anything, readers must not discount its refreshed Opera One for the iOS browser, launched in August 2024, with it already contributing to the robust \"inflow of new iOS users was up +33% year-over-year, during the third quarter, despite the new browsers only being available for less than half of the quarter,\" particularly in the EU, where \"the inflow of new users was up +66% from August to September.\" OPRA's Rule Of 40 Outperformance OPRA This strategic monetization approach has already contributed to OPRA's accelerating advertising revenue growth to $76.8M (+18.8% QoQ/ +26.3% YoY) and to a smaller extent, the search revenues to $46.3M (+4% QoQ/ +13.4% YoY). This is on top of the ongoing adj EBITDA margin expansion to 24.5% on a YTD basis (+1.2 YoY), compared to FY2019 levels of 13.6% - allowing the company to record 14 consecutive quarters of Rule of 40 financial outperformance across revenue and EBITDA growth. It is apparent from these developments, that OPRA is well positioned to generate another beat performance in the FQ4'24 earnings call, despite the raised FY2024 revenue guidance to $471.5M at the midpoint (+18.8% YoY) and stable adj EBITDA margin guidance of 24% (+0.6 points YoY). This is compared to the original numbers of $457.5M (+15.2% YoY) and 24% (+0.6 points YoY) offered in the FQ4'23 earnings call, respectively. OPRA Valuations Seeking Alpha This is also why we believe that OPRA looks compelling at FWD P/E non-GAAP valuations of 17.85x, compared to its 1Y mean of 16x, 5Y mean of 24.18x, and the sector median of 24.24x. Even when we compare its attractive FWD PEG non-GAAP ratio of 1.10x to the 5Y mean of 2.01x, the sector median of 1.85x, and its diversified browser peers, including Microsoft Corporation (MSFT) at 2.42x and Alphabet Inc. (GOOG), (GOOGL) at 1.30x, OPRA's compelling high growth investment thesis cannot be ignored indeed.  So, Is OPRA Stock A Buy, Sell, or Hold?  OPRA 5Y Stock Price TradingView For now, OPRA has had a robust one-day stock price recovery of +10% as it retests the next resistance levels of $18s while running away from its 50/100/ 200-day moving averages. For context, we had offered a fair value estimate of $12.00 in our last article, based on the LTM adj EPS of $0.75 ending FQ2'24 (+20.9% sequentially) and the 1Y P/E mean of 16x. Based on the management's FY2024 adj EPS guidance of approximately $0.93 (+24% YoY), it appears that OPRA has run away from our updated fair value estimates of $14.90. Despite so, there remains an excellent upside potential of +21.1% to our reiterated base-case long-term price target of $22.50 and +86.8% to our bull-case long-term price target of $34.70, based on the consensus' stable FY2026 adj EPS estimates of $1.41 and the speculative upward rerating to its 5Y P/E mean of 24.6x. If anything, despite the recent rally, OPRA continues to offer a relatively rich forward dividend yield of 4.74%, compared to the 4Y mean of 3.29% and the sector median of 1.52%. Given the expanding YTD Free Cash Flow generation at +3.2% YoY, the rich balance sheet at a net cash position of $106M (+1.5% QoQ/ -10.6% YoY), and effectively zero debts, we believe that its dividend investment thesis remains safe as well. As a result of the robust dual-pronged capital appreciation and dividend income prospects, we are reiterating our Buy rating for the OPRA stock. Risk Warning OPRA 1Y Stock Price TradingView Despite the robust FQ3'24 performance and raised FY2024 guidance, we believe that OPRA's recent rally may have been overly done. This is attributed to the historical pattern of rise and fall since the FQ3'24 earnings call, with the stock seemingly unable to hold on to its gains. Assuming the same trading pattern and bullish support at the $14s, we may see the stock return part of the FQ3'24 gains, while retracing to its historical trading ranges of between $14s and $16s in the near-term. At the same time, readers must take note of OPRA's link to Kunlun Tech Limited, with the latter owning 125.66M ordinary shares and 1.17M ADSs, or the cumulative equivalent of 72.4% of the company, with the former effectively being \"a consolidated subsidiary of Kunlun.\" With the controlling shareholder and the parent company based in China, it goes without saying that the stock is likely to be geopolitically impacted assuming a further worsening in sentiments between China and the US - depending on the outcome of the upcoming US elections in November 2024.  As a result, while we remain optimistic about OPRA's long-term prospects, we believe that the stock is likely to be volatile in the near term, warranting a moderate caution before the stock retraces to our recommended Buy zone at between $14s and $16s for an improved margin of safety.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2479973248"}