- OPRA's Browser is growing at 25%+, with 20% of revenue now in NA.
- Margins are rising along with revenue.
- Recent actions indicate a shareholder-friendly company.
- OPRA is the world's most downloaded independent browser.
Opera Limited (NASDAQ:OPRA) is one of the world's leading browser providers and an influential player in the field of integrated AI-driven digital content discovery and recommendation platforms (company presentation here). Providing faster and more innovative web browsers, Opera is the everyday browser of choice for more than 321 million people. The company's headquarters is in Oslo, Norway.
In our opinion, management is firing on all cylinders. 2022 guidance is for revenue of $323 million - $326 million, representing 29% year-over-year growth at the midpoint, and adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) of $62 million - $64 million, a 19% margin at the midpoint, up from 11% in 2021. Opera has been investing in its business for growth opportunities and therefore we believe normalized adjusted EBITDA margins would be in the 25% - 35% range.
Opera has a rock-solid balance sheet. As of September 30, 2022, it had cash and marketable securities of $201 million and $168 million of present value of receivables from the 2022 sales of Nanobank and Star X. Opera holds a 6.4% ownership in OPay, the largest mobile money provider in Nigeria. Opera is also debt-free.
As further proof of management's commitment to maximizing and unlocking shareholder value, in addition to the remaining $35 million of its existing buyback authorization, Opera acquired the shares of a pre-IPO shareholder, 360, representing a 20.6% stake, at $5.50/ADS, or about $129 million. Lastly, Opera recently declared a special dividend of $0.80/ADS, which amounts to roughly $71 million.
- Browser EBITDA 80 million (assumes EBITDA margin of 20% on 400 million rev)
- 12x EBITDA Multiple
- Browser Enterprise Value (EV) 960 million
- OPay 68 million (assumes 80% of fair market value per balance sheet)
- Total EV 1,028 million
- Debt 0 million
- Cash, mkt sec & PV of rec'v from sales of investments 170 million (estimated; adjusted for buyback of 360 stake & special dividend)
- Market Cap 1,198 million
- O/S 90 million (adjusted fully diluted shares converted to ADSs)
- = Implied price $13.30/share
We believe the share price discount to our estimate of fair value is in part due to the fact that Opera is 81% beneficially owned by its Founder/Co-CEO/Chairman, Yahui Zhoi. Such large ownership gives the founder control and prevents influence/activism by independent shareholders. We think this discount is overdone as the Chairman and management team have done an outstanding job building the business. As the company grows its North American and Latin American businesses we believe it will increasingly get more looks from potential investors.
This article was written by
Analyst’s Disclosure: I/we have a beneficial long position in the shares of OPRA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
The specific security identified and described does not represent all of the securities purchased, sold, or recommended, and the reader should not assume that investment in the security identified and discussed was or will be profitable.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.