OPERA : Catalyst for Large Move Upside
Opera is hidden gem waiting to be discovered. Those of you unfamiliar with Opera may read my analysis on Opera - A Massively Undervalued Story
Opera has languished since going IPO at $12. Since its IPO, it has traded between $5 and $15, but mostly below $10. Opera management has made prudent use of its cash generating businesses to buy back almost half of the float which was offered in 2 offerings. The stock has basically gone nowhere while it has steadily grown revenue from ~130M in 2018 to 163M in 2020 and with forecasted revenue of ~245M (~50% YoY growth).
In my opinion, once Opera catches attention of broader investor community, it is short squeeze candidate as 500k shares are shorted with a very limited trading volume ( ~40k shares/day). Read more at the end of this blog on how OPRA can appreciate quickly.
I think at a minimum, not considering all the growth potential, its fair valuation is around 3-4B, or around $35 , which is ~3 times of its current SP of $12.
While Opera was re-inventing itself with its browser+ strategy, it also incubated and scaled Opay, a leading African Mobile Money player, which is in process of raising $400m at over 1.5B valuation.
It also invested 30m for 20% stake into starmaker in 2018, which has seen explosive growth in revenue in last 1 year with ~180m revenue run rate.
It also incubated a fintech based micro lending business and later merged with Mobimagic to form Nanobank which has plans to offer micro loans to other financial products to underbanked population in emerging market of India, Indonesia, Kenya and Mexico with new countries to follow soon. Pre-covid, this was doing 120m in revenue at ~30% margin, but has still not recovered completely. Opera has forecasted that this will return to pre covid level 120m run rate by the end of 2021.
Just the sum of part valuation of these minority stakes is worth almost its entire market cap of $1.4B.
No Longer Hidden for Institutions
Here is the breakdown of Opera Ownership and Float.
Opera has already caught attention of many hedge funds which for the 1st time invested into Opera. Q1 was the 1st time, that Opera has attracted the attention of many hedge funds and it is now part of blockchain ETF $BLOK managed by Toroso.
Institution ownership went up by 30% in Q1’21 compared to Q4’20. A significant increase!
But Opera has not yet caught attention of retail investor or funds which rely on sell side analyst to provide research coverage . Very limited coverage from Sell side analyst means that there is no media coverage and somewhat complication valuation structure with many minority stakes, makes it difficult for retail investor to value Opera. Also the emerging and Europe based market makes it difficult for US investor to take notice since Opera is not a very well known consumer brand although that is changing with its gaming focused browser Opera GX which is gaining steady popularity in US gamers.
Catalyst for appreciation
50% YoY growth in revenue in 2021 to $245m which comes at 30% margins.
Very profitable core business at 30%+ margin, allows them to invest in growth and new opportunities with raising additional funding.
Dify - Fintech solution in Europe which has potential to add additional 500m in revenue in next 3-5 years. Read more on Dify here .
Opera Gaming - Acquisition of YoYo Games and plan to launch an easy to publish gaming engine for novice developer. They want to make creation of Games as simple as publishing a video on TikTok.
Continued growth of Opera GX among gaming community. In less than 2 years it has grown to 9m MAU and is seeing great momentum with many differentiating offering in browser for gaming aficionado’s.
Potential blockchain and Crypto offering with Dify - Opera already has native crypto wallet in browser
Hockey stick growth in the valuation of its minority stakes. Opay has already grown from 500m valuation in 2019 to ~2B post money in 2021. Similarly Starmaker valuation will also see hockey stick growth. Nanobank is launching a credit card offering in Mexico and BNPL offering in emerging countries with trove of data from its micro lending business will lower the customer acquisition cost and lower the credit risk.
Potential IPO or SPAC merger of smule which was last valued at $600M with $100M revenue in 2017. If Smule IPO or SPAC at 2-3B valuation, this would automatically raise valuation of Star Maker which has 38% sequential growth in Q1’21 to 180M revenue run rate.
Potential IPO or SPAC merger of Starmaker which would further unlock the hidden value of Opera’s 20% stake in starmaker.
Once Opera catches the eye of investor community, Opera’s stock can appreciate quickly as not much float is available in retail hands and the new investors seems to be value and growth investors which could mean that they will be having 3-5 year horizon for this Opera investment.
As you can see from above, retail and Opera employees together owning about 2M ADS and Institutions owning around 14M ADS. Knowing how undervalued Opera is, with a good volume of 3-5 million, Opera can quickly trade into high $30’s in matter of days or week.
Once investor start valuing Opera as a growth company, I think Opera will eventually trade around $50-60 and future appreciation from here will depend on how successfully they are in executing Dify and Opera Gaming.
Disclaimer : This is not investment advice or recommendation. Do your own DD on OPRA and let me know if I am wrong in my analysis.I own OPRA shares.These are my thoughts on why I think OPRA is massively undervalued by market. Appreciate if you do your own DD and research as well and reply/comment on my twitter.