Opera Ltd: Ignored AI Stock Up 67% in 2019, Poised to Double

Opera Ltd Has 125% Upside in 2020

Opera Ltd (NASDAQ:OPRA) continues to be a great tech stock I am bullish on, and not just because it is the epitome of an overlooked tech stock.

The company recently reported solid third-quarter results and revised its full-year guidance higher—again.

The developer of Web browsers has seen its share price advance 67% in 2019, but it has plenty of room to run. Even the conservative analysts on Wall Street believe Opera stock could advance 125% over the next 12 months.

OPRA Stock Overview

Most Americans have not heard of Opera Ltd, but that’s because it’s based in Norway and gets most of its revenue from under-served markets like Africa, Asia, and Europe. (Source: “Opera Investor Presentation December 2019,” Opera Ltd, last accessed December 4, 2019.)

Opera Ltd is a leading provider of Web browsers for mobile phones and PCs—a crowded market indeed.

But what sets Opera apart is that its browsers come with built-in ad blockers, unit converters, free virtual private networks (VPNs), and battery-power savers. One of its most recent upgrades includes a new tracker blocker, which speeds up Internet browsing by almost 20%.

The company also makes mobile apps including “Opera Mini,” “Opera Touch,” “OList,” and its artificial intelligence (AI)-powered “Opera News.”

Opera also operates the microlending business “OKash,” which provides small, short-term loans. The average loan is for just $50.00, with an interest rate as low as one percent per day. The duration of the average loan is seven to 30 days.

OKash was only launched in March 2018, but it is already one of the fastest-scaling growth companies in Africa. It has attracted a lot of interest from major hedge funds.

OKash also works alongside Opera Ltd’s mobile payment service “OPay.”

(Source: “Opera Limited (OPRA),” Yahoo! Finance, last accessed December 4, 2019.)

Third-Quarter Revenue Up 119%

In November, Opera announced the results for its third quarter ended September 30, 2019. Third-quarter revenue was up 119% year-over-year at $93.7 million, exceeding the high end of the company’s guidance. (Source: “Opera Limited announces third quarter 2019 financial results,” Opera Ltd, November 14, 2019.)

Search revenue was up 13% quarter-over-quarter at $21.5 million and advertising revenue was up 17% at $18.3 million.

Fintech revenue tripled from the prior quarter to $39.9 million, while retail revenue advanced 106% to $6.0 million in the same period.

The number of monthly active users averaged 232 million for smartphones (an 18% year-over-year increase) and averaged 68 million for PCs (a 16% increase).

Opera reported third-quarter net income of $28.1 million ($0.25 per share), a 190% increase from the $9.7 million ($0.09 per share) recorded in the same prior-year period.

Adjusted net income was $30.6 million, a 145% increase from the $12.5 million recorded in the third quarter of 2018.

In light of the strong third-quarter results, management again raised its full-year revenue guidance. The company now expects full-year revenue to be in the range of $300.0 to $310.0 million, for midpoint growth of 77%.

It also raised the low end of its 2019 adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) to the range of $41.0 to $45.0 million.

For the fourth quarter, Opera expects to report revenue in the range of $95.0 to $105.0 million, for year-over-year midpoint growth of 100%. Adjusted EBITDA for the fourth quarter is projected to be in the range of $15.0 to $19.0 million.

Analyst Take

Opera Ltd has been experiencing a fabulous year, with strong third-quarter results across all of its key metrics.

And that momentum is expected to continue in 2020, driven largely by the company’s microlending business, search revenue, advertising business, new initiatives, and new products.