Opera Stock: Consider Buying This Dip Again

Core Viewpoint - Opera Limited's recent financial performance shows strong revenue growth and cash flow generation, despite a decline in net income due to increased capital expenditures and lower interest income [2][6][22]. Financial Performance - In Q1 FY2024, Opera reported consolidated sales of nearly $102 million, reflecting a 17% year-over-year increase [6]. - The company's EBIT surged by 40.3% year-over-year to $19.6 million, achieving a 19% margin [6]. - Operating cash flow reached $31.0 million, sufficient to cover dividends and capital expenditures, resulting in a cash position of $91.3 million [2]. User Growth and Market Position - Opera has 304 million monthly active users (MAUs), representing about 8% of global internet users, with a growing segment of high ARPU users in North America, Europe, and Latin America [2][7]. - The Opera GX gaming browser saw a 6% quarter-over-quarter increase in MAUs, reaching 29.5 million [2]. Strategic Initiatives - The company has invested $20.2 million in a new AI data cluster in Iceland, which is now operational and expected to support future sales expansion [2][7]. - Opera's management focuses on quality user growth, targeting high-ARPU markets, which is expected to enhance operating leverage [7]. Revenue Guidance and Future Outlook - For Q2 FY2024, Opera expects revenue between $107 million and $109 million, indicating a year-over-year growth of 14-16% [7]. - The company raised its FY2024 revenue guidance to a range of $454 million to $465 million, while maintaining an EBITDA forecast of $106 million to $110 million [7]. Valuation and Market Sentiment - Opera's market cap is just over $1 billion, with the company generating over 10% of its market cap in revenue in a single quarter [8]. - The stock is considered undervalued, with a P/E ratio significantly lower than sector averages, suggesting potential for price appreciation [8][9]. Risks and Considerations - The current search distribution agreement with Google has been extended until 2025, which is crucial for Opera's revenue stream [8][11]. - Concerns exist regarding the potential need to renegotiate this agreement under less favorable terms in the future [11].