February 20, 2022 - 10:04pm EST by
2022 2023
Price: 6.66 EPS 0.50 0.70
Shares Out. (in M): 115 P/E 13.3 9.5
Market Cap (in $M): 767 P/FCF 0 0
Net Debt (in $M): -170 EBIT 0 0
TEV (in $M): 600 TEV/EBIT 8.5 6.0

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OPRA was previously written up by bdon99 in May, 2019.  We recommend reading that writeup for some background on the story.  OPRA shares are somewhat illiquid given the controlling shareholder ownership.

We believe Opera shares offer a high degree of upside asymmetry given its attractive operating story and healthy multi-year growth outlook, the significant expected inflection in company profitability in 2022, and the stock’s highly discounted valuation.  

We see a path to $100 million of 2023E EBITDA and $0.70 of fully taxed EPS/FCF per share, suggesting that OPRA is trading at only 5.5x 2023E EBITDA and, net of projected YE2022 cash of $220+ million, under 7x ’23 EPS.  At 20x forward EPS and adding $2 per share in projected cash, the stock is worth $16 in 12 months, 140% above current levels.

Chairman Yahui Zhou thinks the stock is cheap.  During 2021, he bought $16.5 million worth of stock at an average price of $8.50 per ADS, with purchases as recently as November 24, 2021.  

The company agrees with his assessment.  After buying back $49 million of stock in 2020 at $8.32 per ADS, the company just last month authorized another $50 million. At current prices, an executed buyback would result in a 6%+ reduction in sharecount.         

OPRA just reported yearend results this past Thursday and exceeding analyst expectations for revenue and EBITDA, as it has throughout the year.  2022 revenue and EBITDA guidance of $300-$310 million (up 22% at the midpoint) and $50-$60 million, respectively, were ahead of street estimates of $290 million and $50 million, respectively.  

First quarter 2022 revenue guidance at the midpoint calls for 33% year-over-year growth vs. prior street estimates of 16%. 


What does the opportunity exist?

Since coming public in 2018, Opera has exhibited a pattern of taking two steps forward and one step back.  The company has demonstrated solid growth but also had some misguided forays along the way, including the company’s foray into microlending.


Moreover, the story changed from a highly profitable company with 38% EBITDA margins to a company reinvesting for growth.  Margins dropped all the way to 11% in 2021.


We believe margins likely bottomed in 2021, and we are projecting margins to recover to 22% (company guidance is 18%) in 2022 and 25% in 2023, as the company benefits from further monetization of its past investments in GX, Opera News and other services.  


For now, OPRA is an orphaned IPO and a bit of a show me story. 


If our estimates prove to be directionally accurate the stock is likely to re-rate materially from current levels.  



Opera ltd. is Norwegian-based company operating an internet browser business with approximately 344 million global users.  Approximately 80% of MAUS are mobile with the 20% balance being PC.  


The company’s mobile and PC browsers serve a large audience and the Opera’s recently launched targeted initiatives are showing real traction.  Opera’s staying power is demonstrated by its 27-year history, its healthy growth and sizable user base.  


Opera offers an alternative to the browser behemoths and has managed to carve out an attractive niche through an approach based on personalization, privacy, and faster speeds. We estimate that 20% of Opera’s MAUs are in developed markets, and these users contribute roughly 1/2 of total company revenue, reflecting superior monetization characteristics.  





Opera mobile browsers: Opera Mini, Opera browser for android, and Opera iOS are fast and optimized for mobile browsing.  The browsers come with native ad blockers and an option to further increase speed by blocking ads.  


Opera mini, a thin client browser launched in 2006 for browsing on any phone, compresses incoming data to enable reduced congestion, lower data costs and faster download speeds.  Opera for Android launched in 2013 and the Opera browser for iOS launched in 2018 as Opera Touch.   


Opera for PCs is optimized for speed and reduced battery consumption.  It has a free, built-in VPN and the native ad block feature increases page loading speeds by up to 4x.


Specialized browsers – Opera GX and Opera Crypto

Opera GX - Opera GX launched in 2Q:19 for PCs and had over 14 million users at yearend, over 11 million of which were PC.  Mobile was launched in June 2021. GX growth has continued into 1Q:22.


GX is a customizable PC and mobile browser tailored to gamers to improve their gaming experience.  The company leveraged influencer campaigns with well-known gamers like PewDiePie last year to drive adoption, and we believe another campaign with PewDiePie and others could be instore for early 2022.  


We estimate that GX run-rate annualized revenues approached $40 million in the fourth quarter, and we see a path for the GX browser to get to $100 million of revenue within a couple of years.  









Opera Crypto Browser – Opera recently launched Opera Crypto browser for Android, Windows and Mac.  It is coming soon to iOS.  The product is still in beta but management has high hopes for its decentralized platform in coming years.







News / Content 

Opera news is an AI-driven news aggregation platform that was launched in 2017 as part of the Opera browser and as a standalone app in 2018.  The app supports short-form video.  


Opera news was developed for Africa (where is ranked number one) but the product team has successfully marketed Opera news in large developed markets as well; in Germany, France, UK and US, Opera News has frequently enjoyed a top five ranking in the Google play store news category.


The product is marketed under a variety of brands, including Apex News.  Apex football and Apex cricket were launched in 2021.


Advertising from opera news and broader platform offerings now make up almost half of the advertising revenue segment.


Search revenue

Search ($122 million) represented 48.5% of revenue in 2021.  Like Apple’s Safari (though on a much smaller scale), Opera outsources search to Google and has had a relationship with the company since 2001.  The partnership was recently renewed on nearly identical terms for another three years, and we expect the agreement to continue to be extended over time.   GOOG’s algorithms drive 90% of search revenue, with the balance coming from Yandex.


On an annualized basis, Opera GX monetization increased from $2.70 per MAU in 3Q to $3 per MAU in 4Q.  This suggests that Opera GX is already contributing 10% to 15% of total company revenue.  The browser enjoys a 4.9 rating in iOS. 


GX revenue is currently derived only from search but we expect management to turn on other forms of advertising in 2022, which should further contribute to revenue per user.  


Search revenue has compounded annually at 19% on a two-year stack basis and its growth rate has accelerated more recently, in part reflecting contributions from Opera GX.


Compound Annual Growth, 2021 vs. 2019






Search revenue






Advertising revenue

Ad revenues ($123.9 million in 2021) are derived from referring traffic from Opera’s platforms to e-commerce partners, online travel agencies, social media companies and other partners and other forms of content monetization.  Revenue components include revenue share, cost per click, CPA and subscription revenue. 


Opera News and mobile browser – Ad revenue increased 34% on a compound annual basis from 2019 to 2021, reflecting increased monetization from OPRA news and better monetization of mobile browser advertising.  These trends are expected to continue into 2022.  The addition of advertising (beyond the search bar) to Opera GX should also contribute this year.


Compound Annual Growth, 2021 vs. 2019






Advertising revenue






Operating outlook and valuation

Our 2022 and 2023 revenue estimates are $321 million (guidance $290-$310 million) and $395 million, respectively.


Our EBITDA estimates are $70 million (guidance of $50-$60 million) and $100 million, respectively.   


Our EBITDA estimates drive EPS/FCF estimates of $0.50 and $0.70, respectively for 2022 and 2023, respectively.  


Adjusting for $2 per share in year-end 2022 estimated net cash per share and ignoring the value of non-consolidated assets (which could be worth $1 to $2 per share), we are currently paying about 9x current year EPS and less than 7x forward (‘23E) EPS.  On EV/EBITDA, we estimate the multiples are roughly 7.8x and 5.5x, respectively.  Again, this ignores any value in the company’s three unconsolidated investments.  


We believe OPRA shares can trade at 20x earnings in 12 months.  Adding in cash of $2 per share, we arrive at a target of $16 per share, representing 140% upside. 



Small float and controlled company – Chairman owns over 65% of the company


Perception of company as a Chinese company from a governance perspective though assets are not in China


Appendix - Investments (verbatim from 20-F)


OPay Limited, or OPay, an associate in which we currently hold a 13.1% equity interest, launched its mobile money servicesin 2018. OPay focused its efforts in Nigeria, a market characterized by a massive, unbanked population with low mobile money penetration. OPay has an agent-centric operation as a means to reach the underserved population and currently has over 340,000 registered agents. In December 2020, OPay had monthly transaction volume in excess of US$2 billion, placing OPay among top-tier payments providers in Nigeria. OPay also plans to expand its platform to additional countries beyond Nigeria. OPay’s growing position in Nigeria also drives further brand awareness of Opera.


NanoCred Cayman Co. Limited, or Nanobank, an associate in which we currently hold a 42% equity interest, was formed in August 2020 by merging Opera’s emerging market fintech business with a similar business of Mobimagic. Today, Nanobank offers microlending and other services in Indonesia, India, Kenya and Mexico, and is in the process of launching in several other emerging markets. Nanobank intends to grow by launching in additional geographies, offering new products and services and by continuing to recover from COVID-19 impacts in its existing markets.

Star Group Interactive Inc., or StarMaker, an associate in which we invested US$30 million on November 5, 2018, in exchange for preferred shares in the company, resulting in a 19.4% equity interest, is a technology-driven social media company focused on music and entertainment. StarMaker enables users to record and share their own music videos, collaborate with other musicians, connect with other users and follow their idols on the social platform. StarMaker continued its revenue growth during 2020, with revenues totaling approximately US$89.9 million, up 210% compared to 2019. This was driven by a combination of daily active users doubling in 2020 and improved monetization. In 2021, the company plans to continue its efforts to grow users and increase monetization to drive rapid revenue growth. StarMaker exited 2020 with an annualized revenue run rate of US$127 million (based on its fourth quarter 2020 revenue).

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


Quarterly results

Margin expansion

Share repurchases


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