Opera Gains 27% in 3 Months: Should You Buy, Sell or Hold the Stock?

Core Viewpoint - Opera Limited (OPRA) has demonstrated strong stock performance and revenue growth, but faces challenges with rising marketing expenses and declining earnings estimates. Group 1: Stock Performance - OPRA's shares have increased by 27.3% over the past three months, outperforming the Zacks Computer & Technology sector's return of 10.2% and the Zacks Internet - Content industry's growth of 4.1% [1] - In comparison, peers such as Yelp (YELP), DHI Group (DHX), and Perion Network (PERI) saw gains of 20.6%, 12.5%, and 11.6%, respectively [1] Group 2: Financial Performance - For Q3 2024, OPRA reported a 20% year-over-year revenue increase to $123.2 million, driven by user adoption and enhanced monetization, particularly in advertising and search revenues [2] - Advertising revenues rose by 26% year-over-year to $76.8 million, supported by strong monetization and the expansion of the Opera Ads platform [2] - Search revenues grew by 13% to $46.3 million, focusing on users with high monetization potential [3] Group 3: Product Development and User Growth - The Opera GX gaming browser is the fastest-growing product, adding over 1.8 million net users in the quarter, with monthly active users (MAUs) increasing by 22% year-over-year to 31.9 million [4] - New product launches, including Opera One for iOS and updates to the Opera GX gaming browser, have contributed to user base growth [5] - The company is enhancing its AI capabilities with Aria, its browser AI assistant, which now integrates more deeply with generative AI tools [6] Group 4: Marketing and Profitability Challenges - Opera plans to significantly increase marketing spending in Q4 2024, which may pressure profitability [7] - Marketing and distribution costs rose by 14% year-over-year to $32.5 million in Q3, reflecting intensified promotional efforts for product launches [8] Group 5: Earnings Estimates - The Zacks Consensus Estimate for Q4 2024 earnings is currently 21 cents per share, a decline of 22.2% over the past 60 days, indicating a year-over-year drop of 84.78% [9] - For the full year 2024, the consensus estimate is 79 cents per share, reflecting a 10.2% downward revision and a significant year-over-year decline of 57.53% from 2023 [9]