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Headed into the new year, investors must navigate geopolitical conflict, domestic economic uncertainties, and an upcoming presidential transition in the U.S.
Although it may feel harder than usual to pick stocks, one standout name from the tech sector seems like an easy win. Although it has limited coverage on Wall Street, analysts that do follow it are betting on continued upside over the next 12 months.
About Opera
Founded in 1995, Opera (OPRA) is known for its web browsers and digital content discovery platforms. Opera develops internet browsers that are known for their speed, security, and innovative features like integrated ad blockers and free virtual private networks (VPNs). Additionally, Opera provides AI-driven digital content discovery and advertising platforms
Valued at a market capitalization of about $1.7 billion, OPRA stock has jumped nearly 45% on a year-to-date basis. The stock, which has outperformed the Nasdaq Composite ($NASX) in this period, also offers a dividend yield of 4.1%. This is much higher than the sector median of 1.873%.
Robust Financials Benefit Opera Stock
The most recent quarter for Opera was overall positive. Revenue for the quarter came in at $123.2 million, up 20% from the previous year. A year-over-year increase of 26% and 13% in advertising and search revenues, respectively, contributed to the overall growth. Earnings per share moved higher to $0.20 from $0.18.
The company also raised its full-year revenue guidance to a range from $470 million to $473 million. At the midpoint, this would imply 19% year-over-year growth.
Annualized average revenue per user (ARPU), a key metric used to evaluate a web platform, rose 27% from the prior year to $1.66. Opera also reported a monthly active users (MAUs) count of 296 million at the end of the third quarter.
Meanwhile, cash flows also remained solid with Opera reporting net cash from operating activities of $34.9 million in the quarter, which more than doubled the prior year's $16.2 million.
Strategic Drivers
A standout contributor to this success is Opera GX, its gaming-focused browser. GX has seen remarkable growth, with MAUs surging 600% to 32 million over the past four years and an annualized ARPU of $3.68. A notable highlight is Opera GX's collaboration with Riot Games for the League of Legends World Championship event, showcasing the company's ambition to strengthen its presence in the gaming sector.
Additionally, Opera's revamped Opera One browser for iOS, launched in August 2024, has already shown promising results. It contributed to a 33% year-over-year increase in new iOS users during the third quarter, with particularly strong growth in the European Union, where new user inflow rose 66% from August to September, despite being available for less than half the quarter.
Looking ahead, Opera is set to expand its product offerings and enhance user experiences with innovations like the Opera One R2 browser and the integration of its AI assistant, Aria. By embedding user-friendly AI functionality without compromising privacy or safety, Opera aims to differentiate itself within the competitive browser market, positioning AI as a key long-term advantage. This strategic vision underscores Opera's commitment to innovation and its adaptability to evolving user needs.
Growth and Valuation for Opera Shares
The company is currently trading in a sweet spot. It has several growth drivers to tap into and its shares are currently reasonably valued. This makes it a compelling pick for 2025 and beyond.
Analysts are projecting forward revenue and earnings growth rates of 18.12% and 92.1%, compared to the sector medians of 5.66% and 8.18%, respectively.
The stock is trading at a forward price-earnings ratio of 11.8x, significantly lower than the sector median of 31.5x. Its price-book ratio of 0.84x is also much lower than the sector average of 4.41x, and the price-cash flow ratio of 9.83x is lower than the sector average of 22.85x.
What Do Analysts Think About OPRA Stock
The consensus of four analysts covering OPRA stock is a “Strong Buy” rating with a mean target price of $24.75. Based on the Dec. 6 closing price, this implies roughly 30% upside potential.
