On Friday, Goldman Sachs (NYSE:GS) adjusted its outlook on Opera Limited (NASDAQ:OPRA) shares, raising the price target to $19.50 from the previous $17.50 while keeping a Buy rating on the stock. The adjustment follows Opera's second-quarter earnings for 2024, which showcased notable performance improvements.
Opera's recent financial report highlighted several key points, including an outperformance in both top-line revenue and EBITDA. The company has been focusing on attracting higher average revenue per user (ARPU) segments while continuing to invest in growth initiatives such as marketing.
Additionally, Opera's management has observed positive developments in Europe following the implementation of the Digital Markets Act (DMA), which they believe could lead to increased user growth and advertising demand in the long term.
The company is also making strides in artificial intelligence, with the growing adoption of its Aria assistant and the integration of third-party AI models. This innovation is seen as a potential long-term competitive advantage for the Opera browser.
Goldman Sachs noted that the evolving competitive landscape, influenced by regulatory changes like the DMA in Europe and the Google/Department of Justice ruling in the United States, will likely be a focal point for investors.
Looking ahead, Goldman Sachs anticipates that Opera will continue to benefit from long-term secular trends in digital advertising. The firm also expects the company to gain from shifts in geographic and product mix, which could drive sustained double-digit percentage growth over the coming years. The reiterated Buy rating and increased price target reflect confidence in Opera's growth trajectory and market position.
In other recent news, Opera has launched its AI-powered browser, Opera One, for iOS devices, offering a full screen browsing experience and a suite of features designed to enhance usability. The new version has seen a significant increase in user adoption within the EU, following the implementation of the browser choice ballot.
Opera has also announced plans to integrate on-device artificial intelligence capabilities into its Opera One and Opera GX browsers, supported by substantial investments, including an NVIDIA (NASDAQ:NVDA) H100 card-powered AI data cluster in Iceland.
Opera's browser AI, named Aria, has gained a new image understanding feature as part of the company's ongoing AI Feature Drops program. In collaboration with Google (NASDAQ:GOOGL) Cloud, Opera has integrated Google's Gemini models into its Aria browser AI, aiming to provide advanced AI features to its users.
This partnership coincides with the latest AI Feature Drop, which includes free image generation using Google Cloud's Imagen 2 model on Vertex (NASDAQ:VRTX) AI and voice output capabilities.
Opera has maintained a Buy rating from TD Cowen, with a steady stock price target of $25.00. TD Cowen highlighted Opera's strategic focus on attracting affluent users in developed markets and the integration of AI features into Opera's core browser as drivers for sustained revenue growth.
Opera's financial position, marked by the absence of debt and robust free cash flow growth, was also noted as indicative of the company's potential to increase return of capital to its shareholders.
InvestingPro Insights
Following Goldman Sachs' optimistic outlook on Opera Limited (NASDAQ:OPRA), InvestingPro data further strengthens the company's financial narrative. Opera's market capitalization stands at $1.28 billion, indicating a solid presence in the market. The company's P/E ratio is attractively low at 7.19, suggesting that the stock could be undervalued relative to its earnings. Moreover, Opera has demonstrated robust revenue growth of 18.8% over the last twelve months as of Q1 2024, underlining its successful expansion and operational efficiency.
In addition to these promising metrics, InvestingPro Tips highlight that Opera holds more cash than debt, providing financial stability and flexibility. Furthermore, the company's strong return over the last month, with a price total return of 19.72%, suggests a positive market sentiment. It's also noteworthy that analysts predict profitability for the year, which is supported by Opera's performance over the past twelve months. For investors seeking a deeper dive into Opera's potential, InvestingPro offers additional tips and insights on their platform.
These indicators and insights, coupled with Goldman Sachs' raised price target, paint a picture of a company that is not only performing well currently but also has the financial health to sustain and potentially enhance its growth. With Opera's strategic focus on high ARPU segments and AI innovation, these metrics may be particularly relevant for investors considering the company's future prospects.
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