The stock of tech company Opera (NASDAQ:OPRA) has been up over 40% in the past month, based on the strength of Q4 and FY2023 results. Despite the rapid price rise, it trades a relative value, beckoning tech-oriented value investors with its AI-driven siren song.
Did Somebody Say “AI”?
Opera is a provider of web browser technology, holding a 2.5% share of the worldwide browser market. Its product range includes the Windows, iOS, Android, and Linux Opera browsers. The company is well-positioned to benefit from new regulatory measures promoting healthy competition, such as the recent opening up of iOS in Europe.
As a browser company, Opera leverages the closed-loop environment of the browser to capture user interest and context, unlike advertising platforms that rely on third-party signals and cookies. As such, Opera Ads has proven to be a competitive player in the advertising landscape, attracting advertisers through its technical abilities to augment targeting capabilities. Advertising now represents 60% of overall revenue.
Opera GX, another product from Opera, enjoys cachet with a highly desirable demographic of young and highly engaged PC gamers. It has continued its healthy growth trajectory with a user base of 27.8 million and has reached an annualized revenue run rate of almost $100 million.
While the above products and services offer an attractive mix, what has market participants most excited is Opera’s new core growth driver – its generative AI browser, Aria. Launched in May 2023, Aria garnered over a million users within two months of its launch. To strengthen its AI efforts, the company is targeting the build-out of a new energy-powered data center in Iceland that uses the country’s climate to reduce cooling costs.
Opera’s Recent Financial Results
Opera posted GAAP EPS of $1.38, significantly beating the consensus expectation of $0.18 on revenue of $113 million. For 2023, the revenue figure stood at $397 million, and the adjusted EBITDA was $94 million, marking a revenue increase of 20% and an adjusted EBITDA margin of nearly 24%.
In terms of projections for Q1 2024, management anticipates revenue between $99 million and $101 million, signifying a year-over-year growth of 15% at the midpoint. Adjusted EBITDA is expected between $22.5 million and $24.5 million, reflecting a 24% midpoint margin. The full-year 2024 guidance includes a revenue forecast of $450 million to $465 million, denoting a midpoint growth of 15%, and an adjusted EBITDA guidance of $106 million to $110 million, representing a 24% midpoint margin.
What is the Price Forecast for OPRA in 2024?
Despite the recent price climb, shares of OPRA are trading in the lower half of the 52-week range of $9.40-$28.58 and demonstrate positive price momentum, trading above the 20-day (14.85) and 50-day (13.50) moving averages.
The stock looks relatively undervalued, with a P/E ratio of 8.42x compared to the Communication Services sector average of 20.78x and the Internet & Content Information industry average of 22.48x.
Analysts are bullish on the stock. OPRA is rated a Strong Buy based on four unanimous Buys in the past three months. The average price target for OPRA stock is $22, representing 39.15% upside from current levels.
The Big Picture on Opera
Opera has been enjoying a solid growth trajectory. Despite the recent increase in share price, the stock remains relatively undervalued. The unique mix of Opera’s product offerings, including its AI-driven technologies, is not just a trend but a significant shift in the tech landscape, making Opera a compelling investment opportunity.
