Opera Limited’s OPRA shares have gained 19.6% in the past month, outperforming the Zacks Computer & Technology sector’s modest growth of 0.6% and the Zacks Internet - Content decline of 1.8%.

OPRA’s robust stock price performance has been driven by its impressive third-quarter 2024 results. Third-quarter revenues grew 20% year over year to $123.2 million, driven by continued momentum in user adoption and broader monetization efforts, particularly in advertising and search revenues.

Advertising revenues grew 26% year over year to $76.8 million, led by strong monetization performance, continued expansion of the Opera Ads platform and high purchase-intent traffic directed to advertising partners.

Search revenues witnessed a 13% increase and rose to $46.3 million, driven by a targeted focus on users with high monetization potential.

Opera’s Solid Q3 Operating Performance

Opera saw a 27% year-over-year increase in average revenue per user (ARPU), reaching an annualized rate of $1.66 across its products and geographies.

Opera had an average of 296 million monthly active users (MAUs) in the third quarter. Although the company continues to see growth in high ARPU segments, this increase is balanced by a decline in feature phone users in emerging markets.
 
The Opera GX gaming browser remains the company's fastest-growing product, adding more than 1.8 million net users in the quarter. It reached an average of 31.9 million MAUs across PC and mobile, marking a 22% year-over-year increase.

Opera reported an operating profit of $23.2 million in the third quarter of 2024, which corresponds to a 19% margin. This is an increase from the operating profit of $16.1 million and a 16% margin in the third quarter of 2023.

Adjusted EBITDA for the third quarter was $30.8 million, indicating a 25% margin. This marks an increase from $23.8 million adjusted EBITDA and 23% margin reported in the prior-year quarter.

Increased Marketing Spend to Challenge OPRA's Growth

On its third-quarter earnings call, Opera stated that the company will substantially increase marketing spending in the fourth quarter. The planned increase in marketing expenses is associated with the launch of Opera One R2 and other initiatives. This increase in marketing spending is expected to place temporary pressure on profitability despite continued revenue growth. In the third quarter, marketing and distribution costs rose 14% to $32.5 million, indicating intensified promotional efforts to support key product launches like the Opera One R2 browser.

The increased marketing spending is expected to reduce operating margins in the short term, as the focus shifts to driving long-term user acquisition and engagement.

Analysts have also turned cautious about the company’s near-term earnings growth prospect as implies by downward estimate revisions. The Zacks Consensus Estimate for fourth-quarter earnings has been lowered by 6 cents to 21 cents per share in the past 30 days. The consensus mark for 2024 earnings has been revised downward by 9 cents to 79 cents per share at the same time.

OPRA’s Zacks Rank & Valuation

OPRA currently has a Zacks Rank #4 (Sell), which implies that investors should stay away from the stock for the time being.

Its Value Score of C indicates a stretched valuation at this moment.

Key Picks

Audioeye AEYE, Broadcom AVGO and Cognizant Technology Solutions CTSH are some better-ranked stocks in the broader tech sector. Each of the stocks currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for AEYE, AVGO and CTSH is currently pegged at 25%, 16.52% and 7.79%, respectively.

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