Opera Limited (OPRA): A Hidden Growth Gem with Strong Catalysts Ahead

Opera Limited (NASDAQ: OPRA), the Norwegian browser and ad tech company, has quietly built a compelling growth story that's yet to fully resonate with the broader market. Despite a 29% revenue surge in Q4 2024 and a disciplined capital allocation strategy, OPRA trades at just 14x forward earnings, well below its peers. This valuation discount ignores three key catalysts: Opera GX's dominance in high-ARPU gaming demographics, AI-driven ad revenue surging at 38% YoY, and a 4% dividend yield paired with buybacks that have reduced shares outstanding by 30% since 2020. Let's unpack why this is a buy.

1. Opera GX: The 8% Penetration Play in Gaming's $300B Market

Opera GX, the company's browser tailored for gamers, has carved out a niche in one of tech's fastest-growing segments. With 33.9 million monthly active users (MAUs) in Q4 2024 (+22% YoY), GX now commands ~8% penetration of the global gaming demographic. This isn't just user growth—it's high-ARPU monetization.

The average revenue per user (ARPU) for Opera's core business rose 37% YoY to $1.97, driven by GX's ability to upsell premium subscriptions, in-game ads, and partnerships with gaming platforms. Unlike generic browsers, GX integrates tools like CPU throttling, game discovery, and a vibrant community forum, creating stickiness.

Crucially, GX's user base is concentrated in Western markets (where ARPU is 3x higher than emerging markets), yet Opera still holds just ~1% share of the $300B global gaming audience. This leaves ample room for expansion through targeted marketing and partnerships with platforms like Steam or Twitch.

2. AI-Driven Ad Revenue: A 38% Growth Engine Ignored by the Market

Opera's advertising revenue grew 38% YoY in Q4 2024, accounting for 64% of total revenue. This outperformance stems from its AI-powered Opera Ads platform, which targets high-purchase-intent traffic via intent-based audience segmentation.

While the financial reports don't explicitly break down AI's contribution, the 35% rise in depreciation/amortization (to $4.4M) hints at investments in AI infrastructure, such as the “AI data cluster” acquired in early 2024. This tech likely fuels Opera's ability to:
- Monetize its 296M MAU base (the 4th-largest browser in Europe) across search, ads, and e-commerce partnerships.
- Deliver 20%+ gross margin improvements in ad sales through dynamic pricing and real-time bidding.

The launch of Opera Air in February 不在乎 2025, a browser with AI-driven productivity tools (e.g., mindfulness features, binaural beats), further underscores Opera's AI-first strategy. This product could attract premium users willing to pay for ad-free experiences or premium features, boosting ARPU further.

3. Capital Returns: A 4% Dividend & Share Buybacks Fueling Value

Opera's financial discipline stands out. The company has returned $115M to shareholders since 2020 through dividends and buybacks, reducing shares outstanding by 30%. With a current dividend yield of 4% (vs. 1.2% for S&P 500 peers) and $127M in net cash, management has ample room to continue rewarding investors.

The Q1 2025 guidance—29% revenue growth and 24% EBITDA margins—suggests this trend will continue. Even better, Opera's leverage is minimal, with no material debt, allowing it to pivot aggressively in new markets.

Addressing Concerns: Chinese Ownership & Google Dependency?

Critics point to Opera's historical ties to Chinese firm Kunlun Tech (now owning just 5% of shares) and its reliance on Google for search traffic. Both fears are overblown.

• Kunlun's stake: Reduced from 50% in 2020 to <5% today, with Opera's board now majority independent.
• Google dependency: Opera's search revenue (17% YoY growth) now comes from diversified partnerships (e.g., Microsoft's Bing, local engines in emerging markets). Its Opera Ads platform also reduces reliance on third-party ad networks.

Valuation: 14x Forward P/E vs. 25x for Ad Tech Peers

At current prices, Opera trades at 14x 2025E earnings, a stark discount to ad tech peers like Snap (25x) or Criteo (20x). This undervaluation persists despite:
- A 38% ad revenue CAGR since 2020.
- $555M–570M in 2025 revenue guidance (+17% YoY).
- Untapped upside from its 30% stake in Nigerian fintech Opay, which could be monetized via an IPO or sale.

Investment Thesis: Risk/Reward at 14x P/E

Opera is a deep value pick with three growth engines: GX's gaming dominance, AI-driven ad scaling, and capital returns. Near-term catalysts include:
1. Opera Air's monetization (launching in early 2025).
2. Opay's valuation update (expected in 2025).
3. Western market share gains via GX's community-driven growth.

Buy Below $5.50 (current price ~$5.20). Upside targets:
- $7.00 (20x 2025E earnings).
- $9.00+ if Opay's stake is sold at a premium.

Risks: Ad market slowdown, regulatory scrutiny in emerging markets, or rapid GX user churn. But Opera's strong cash flow, diversified revenue, and shareholder-friendly policies mitigate these risks.

Final Take

Opera Limited is a rare combination of underappreciated growth and undervalued assets. With a fortress balance sheet, AI-fueled ad momentum, and a product (GX) that's already outperforming in high-margin markets, this browser giant is primed to surprise. Investors who buy now at 14x P/E are likely to be rewarded handsomely as Opera's story clicks with the market.

Final price target: $7.00–$9.00 by end-2025.