Why Opera, Ltd. Rallied Today
Key Points
Opera beat on the top line but missed on EPS in the fourth quarter.
Nevertheless, a strong outlook and big share repurchase announcement sent shares higher.
The company's focus on luring higher-paying Western market users appears to be paying off.
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Shares of internet browser specialist Opera, Ltd. (NASDAQ: OPRA) rallied 20.2% on Thursday as of 1:05 p.m. EDT.
Opera held its fourth-quarter earnings report this morning, in which adjusted (non-GAAP) earnings per share missed estimates, but revenue exceeded them by a fair amount. Opera also gave strong guidance for the year ahead, while authorizing a significant share repurchase program.
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Opera sings into 2026
In the fourth quarter, Opera recorded 22% revenue growth to $177.2 million, while adjusted EPS grew just 9% to $0.30. In the press release, management pointed to some increased personnel expenses that was abnormal in the quarter due to quarterly fluctuations, which otherwise depressed net margins.
Still, for the year ahead, management predicts between 17% and 20% revenue growth with relatively stable adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margins. That appeared to encourage the market.
Also encouraging was the announcement of a $300 million share repurchase program, which amounts to 22% of Opera's market cap, even after today's jump. Opera also has $155 million in cash and no debt, and already pays a hefty dividend, with a yield of 6.4% at today's stock price.
Image source: Getty Images.
Opera's strategy seems to be paying off
Opera makes money from in-browser advertising, and also "query" revenue when a user either searches or queries an LLM directly in its browser Search bar.
Opera's management has made an effort to pivot the company toward higher-paying "Western" users that generate higher average revenue per user, and that strategy appears to be paying off. ARPU was $2.49 in the quarter, up 26% year-over-year, more than offsetting the 3.8% year-over-year decline in overall users to 284.3 million. But another positive was that Western users grew by 2 million, bringing the total of this target group to 60 million.
Opera trades at a remarkably low valuation of less than 10 times this year's adjusted earnings estimates, even after today's jump; therefore, it appears to be a good way for value investors to play the digital advertising and AI-adjacent space.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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