Opera Ltd: Overlooked AI Stock Up 110% Since April, Could Double Again

Opera Ltd Sees New Opportunities for Growth Due to COVID-19

Opera Ltd (NASDAQ:OPRA), one of the world’s leading browser providers and a pioneer in the field of integrated artificial intelligence (AI)-driven digital content, is an overlooked tech stock that has been on a great run over the last few months.

In early April, OPRA stock hit an intra-day low of $4.60. Then on July 6, it hit an-intra-day high of $9.62, for a three-month gain of 109%.

Opera stock has seen its fortunes reverse since the COVID-19-fueled sell-off. That’s thanks to the company’s strong first-quarter financial results. The pandemic has also created new opportunities, driven by an increased usage in the company’s browsers, mobile apps, and “Opera News” platform.

The company’s outlook remains strong. In March, Opera News set a new record, with more than 190 million active monthly users (MAUs). In addition to having a record number of users, the company has a strong balance sheet, and healthy cash position. (Source: “Opera Limited Announces First Quarter 2020 Financial Results,” Opera Ltd, May 20, 2020.)

While OPRA stock has soared more than 100% since April, it still has lots of room to run. Wall Street analysts see Opera stock advancing approximately 65% to around $15.00 over the next 12 months.

But that only gets it back to where it was in September 2019. That projection might be a little too conservative. A 12-month share price forecast of $21.00 might be more realistic. That implies near-term upside potential of 130% from the current level.

OPRA Stock Overview

Opera is one of the world’s leading Internet brands, providing content, classified ads, and financial technology (fintech) to more than 350 million MAUs. (Source: “Opera Investor Presentation, February 2020,” Opera Ltd, last accessed July 9, 2020.)

Most U.S. investors have never heard of the Opera, even though it’s a big company. That’s because the browser is geared toward under-served markets like Africa, parts of Asia, and Europe.

The Norway-based company has an annual revenue run rate of more than $500.0 million, which has been growing 100%+ year-over-year, and is profitable. Its fintech division has an annualized revenue run rate of almost $300.0 million, and that is expected to grow significantly.

Opera Ltd’s products include Opera browser for computers (“Windows,” “macOS,” and “Linux”). Opera News, its AI-powered content distribution platform, was launched in 2018. Other apps include “Opera for Android,” “Opera Mini,” “OperaGX,” and “OList.”

“OKash” is part of OPRA’s fintech division. Launched in 2018, it offers instant microloans to approved borrowers. Funded by Opera’s strong balance sheet, OKash is available in Africa and parts of Asia, with new markets expected to launch soon.

Opera will be expanding its fintech offerings over the coming year. The company has more than 50 million browser users across Europe. The biggest segment of that user base is millennials, who, the company notes, “are highly dissatisfied with their current financial offerings.”

To meet those needs, Opera Ltd announced in January that it acquired European banking-as-a-service company Pocosys. The company specializes in providing modern banking technologies to fintech companies. Pocosys has previously licensed its financial software to companies in Ghana, Japan, and the UK. (Source: “Opera Acquires European Banking-as-a-Service Company Pocosys,” GlobeNewswire, January 27, 2020.)

Opera expects to launch payment and banking products in one market in 2020 and then expand them to other target countries in Europe.

Chart courtesy of StockCharts.com

Strong First-Quarter Results

On May 20, Opera announced that its revenue for the first quarter ended March 31, increased 177% year-over-year to $138.2 million, exceeding the top end of the company’s guidance. (Source: Opera Ltd, May 20, 2020, op. cit.)

Opera’s total user base exceeded 360 million MAUs in March, including record MAUs for Opera News, “Opera for PC,” “Opera GX,” and Opera for Android. The company’s fintech division continues to experience solid growth, with first-quarter revenue of $94.7 million, driven by 8.6 million loans issued during the quarter.

Opera reported first-quarter adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of $8.6 million and a net loss of $20.9 million. Excluding an “extraordinary” additional loan loss of $27.0 million related to COVID-19, the company’s adjusted EBITDA would have been within its guidance range.

The company ended the first quarter with cash and marketable securities of $215.0 million, up from $182 million on December 31, 2019.

Frode Jacobsen, CFO, said,

Opera started 2020 on a strong trajectory with healthy growth and profitability across the business, including revenue growth of 177% year-over-year in the first quarter. However, the unprecedented conditions relating to the COVID-19 pandemic have had a near-term financial impact, though they have also created opportunities driven by increased usage of our browsers and Opera News.

(Source: Ibid.)

Business Outlook

Looking ahead, Opera Ltd’s management withdrew its 2020 guidance due to the COVID-19 pandemic, and it’s not ready to provide new guidance. Still, the company’s outlook remains bright.

Jacobsen said,

Overall, we see a clear path towards recovery, our preparations to ramp our microlending business are underway and our strategic vision remains intact. We remain well positioned to capitalize on our long-term market opportunities, with a record number of users discovering our products, a strong balance sheet and a healthy cash position.

He added, “Despite the impact from COVID-19, the fundamentals of our business remain strong and we are encouraged by the initial signs of a recovery in search and advertising monetization. We have also started our preparations for a rapid re-scaling of our fintech business.”

Analyst Take

Opera Ltd is a great AI tech stock that has been experiencing healthy growth, as evidenced by its first-quarter revenue growth and its record user base.

Despite the unpredictability of COVID-19, Opera Ltd has a strong balance sheet and healthy cash position. Because more people are using the company’s browsers and Opera News platform, the pandemic has created new opportunities for sustained growth.