We came across a bullish thesis on Opera Limited (OPRA) on Substack by Welfare Capital. In this article, we will summarize the bulls’ thesis on OPRA. Opera Limited (OPRA)'s share was trading at $18.37 as of March 19th. OPRA’s trailing P/E was 20.41 according to Yahoo Finance.
Opera Ltd. (OPRA): Pioneering Agentic AI Browsing with Browser Operator
A woman using a mobile browser to search for news stories to stay up to date.
Opera’s core browser business remains a strong, defensible asset with significant growth potential, yet the stock trades at an attractive valuation of 14x forward earnings. Compared to U.S.-listed software peers, Opera is deeply undervalued despite its strong profitability, balance sheet strength, and consistent shareholder returns. The market appears to be discounting Opera due to its niche appeal, historical mismanagement, and concerns over its Chinese majority ownership. However, these concerns fail to reflect the company’s transformation, particularly the success of its GX browser for gamers, which has driven Opera’s resurgence. GX has only 8% penetration in its target demographic, leaving substantial room for further adoption, with user testimonials indicating strong product-market fit. The company’s capital return program has also been a standout, with Opera repurchasing 30% of its shares since 2020, including a 17% reduction in 2023 when the stock was trading at deeply discounted levels. Dividends remain generous, with a semiannual payout yielding 4%, despite Opera’s 20%+ annual revenue growth and robust free cash flow margins.
Opera’s struggles in the past, including its 2016 acquisition by a Chinese-led consortium, led to mismanagement and distractions such as a failed microlending business in Africa. These issues culminated in a 2020 short report from Hindenburg Research, which drove the stock down sharply. Since then, Opera has executed a complete turnaround, divesting the microlending division in 2022 and refocusing on its core browser operations. The company’s controlling shareholder, James Yahui Zhou, has also pivoted, recognizing Opera’s value as a legitimate business rather than as a financial engineering vehicle. While concerns over Kunlun’s majority ownership persist, Opera’s listing on the NASDAQ and headquarters in Oslo mitigate regulatory risks. Notably, Kunlun reduced its stake by 3% in December 2024, selling 2.4 million shares for $49 million, signaling a possible shift in its ownership strategy. While insider selling could create temporary stock pressure, it does not indicate fundamental weakness, as Opera’s Q4 2024 results exceeded expectations.
Beyond its core browser business, Opera holds a 9.5% stake in Opay, a rapidly growing African fintech platform valued at nearly $3 billion in 2021 after raising $400 million from SoftBank. Opera’s stake is currently worth approximately $269 million, but fluctuations in Opay’s valuation could impact its financials. If Opera monetizes this stake, a special dividend is likely, given its shareholder-friendly capital allocation history. However, a write-down could negatively affect net income, presenting a risk. Another potential risk is Opera’s reliance on Google, which accounts for 32% of revenue through an ad partnership structured in three-year terms with an optional one-year extension. While this creates some uncertainty, Opera’s differentiated product offerings and growing user base make contract non-renewal unlikely.
Opera’s revenue model is driven by search partnerships and advertising, with the latter experiencing rapid growth. When users conduct searches through Opera’s browser, the company shares revenue generated from those queries. Meanwhile, Opera’s advertising revenue, which surged 38% year-over-year in Q4 2024, is bolstered by improved ad-targeting capabilities following a $20 million investment in AI-powered data infrastructure. This growth far outpaces its 17% search revenue increase, demonstrating Opera’s ability to diversify and expand its monetization channels.
Key growth drivers for Opera include expanding its total addressable market through rising global internet penetration, increasing market share with Opera GX, and growing ARPU. Opera GX has been a standout, with monthly active users (MAUs) surging from 4.5 million in 2020 to 32 million today. This segment targets a lucrative Western gaming demographic, which is far more engaged and commands higher ARPUs than Opera’s traditional user base. ARPU has quadrupled over the past four years to $1.97, with further growth expected as Opera enhances its ad-targeting and monetization strategies. Additionally, increased ad spending from streaming and e-commerce partners is expected to further fuel revenue expansion.
Opera delivered a strong performance in 2024, with full-year revenue climbing 21% from 2023, capped by a 29% surge in Q4. This acceleration was driven by stable MAUs, continued GX user growth (up 22% year-over-year), and a seasonal boost from holiday shopping. A deliberate shift toward Western markets, where monetization is stronger, has also played a crucial role, with these users now accounting for over half of Opera’s revenue despite representing just 19% of its total user base. By pulling back from lower-value markets in Asia and Africa, Opera has strengthened its financial profile and positioned itself for sustained profitability.
Financially, Opera maintains a rock-solid balance sheet with no long-term debt, $126 million in cash, and $269 million in long-term investments, primarily its stake in Opay. The company’s return on equity (ROE) currently stands at 8.7%, but if it optimizes its capital structure by monetizing the Opay stake, ROE could climb significantly higher. This, combined with continued share repurchases and dividends, supports a highly favorable risk/reward profile. Despite lingering concerns over Kunlun’s ownership and its reliance on Google, Opera’s operational strength and capital allocation discipline make it a compelling investment opportunity at current valuations. The stock’s discount may ultimately prove to be a temporary mispricing rather than a structural limitation, offering investors an attractive entry point with significant upside potential.
Opera Limited (OPRA) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 16 hedge fund portfolios held OPRA at the end of the fourth quarter which was 14 in the previous quarter. While we acknowledge the risk and potential of OPRA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than OPRA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
