Up 400%, OPRA Still Looks Intriguing
OPRA's bull case is simple — but a key risk remains
On its face, internet browser business Opera Limited OPRA 0.00%↑ looks like an easy buy. Shares trade at a little over 10x EBITDA despite impressive growth and profitability.
With one quarter left in the year, Opera is guiding for revenue to increase 19% year-over-year, with full-year Adjusted EBITDA margins of 24%. Leverage is not an issue: Opera actually has no debt, with cash and investments carried at $360 million.
Underpinning those fundamentals is an attractive business. Opera’s web browser obviously competes with giants Alphabet and Microsoft, but the company has carved out a solid, if small, niche in the space. A host of features and the launch of a gaming-focused browser have solidified that niche and driven recent growth. Even management looks solid: investments in a karaoke app and an entrance into emerging market fintech both were exited at gains, and a payment business in Africa appears to be growing nicely.
Not All Good
At the same time, there are some real questions. Even though the business is headquartered in Norway, Opera Limited is a Cayman Islands-incorporated company that is majority-controlled by a Chinese private equity firm. Accusations of self-dealing, including those raised by Hindenburg Research back in 2020, have dogged the stock.
And while bulls point to a strong niche in the browser space, Opera’s share remains small, at less than 3% worldwide. Notably, that share has declined over time. So Opera’s top and bottom-line growth has come despite share losses, leaving the business possibly exposed to a plateau in a key metric.
Meanwhile, the stock itself has been a rollercoaster ride, no doubt amplified by the low float:
source: Koyfin
How We Got Here
Opera’s first browser publicly launched in 1995, a year after Netscape and roughly concurrent with Microsoft’s release of Internet Explorer. Opera was originally “trialware”, requiring a purchase after an initial period, but the company switched to ad-based monetization in 2000. Five years later, ads were removed, and a partnership with Google, the default search engine, became the primary source of revenue (it still is; Google accounted for 42% of revenue in 2023). In 2002, Opera launched the first browser for smartphones, and an Android browser launched in 2013 remains a key product today.