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Opera (NASDAQ:OPRA) Stock Undervalued despite Revenue Upswing

Opera (NASDAQ:OPRA) recently released its earnings report on April 25, which slightly exceeded expectations. While there was a positive response to references to artificial intelligence (AI) in the last quarter, the company’s announcement about investing heavily in a new AI project has disappointed some investors. This has led to a 9.64% drop in the stock over the past month.

Despite the recent decline, shares of Opera continue to trade at a relative discount. Management has raised guidance for the year, which has helped to maintain the long-term case for the stock.

Opera is a global web browser technology company that offers products for Windows, iOS, Android, and Linux. The company takes a unique approach by focusing on enhanced privacy through an in-browser ad platform instead of relying on third-party signals and cookies. Ads make up 60% of Opera’s overall revenue.

Opera has also gained recognition for its gaming-centric product, Opera GX, which has a growing user base of 27.8 million and generates close to $100 million in annual revenue.

The company is constantly improving its platform with AI offerings to stay ahead in the industry. Opera recently completed a green energy-powered AI data center in Iceland and introduced its AI features drop project, which gives users access to the latest AI developments. With frequent innovations, Opera is continuing to enhance its offerings.

In terms of financial performance, Opera reported a 17% year-over-year increase in Q1 revenue to $101.9 million, surpassing expectations. Revenue growth was driven by an expanding user base in high-revenue regions and increasing advertising and search revenues. The company’s EPS of $0.17 also exceeded expectations.

Based on the strong start to the year, Opera raised its revenue guidance for the second quarter and full year. The company expects revenue to grow by 15% year-over-year in Q2 and 16% for the full year.

Analysts have been bullish on Opera’s stock, with a Buy rating from TD Cowen analyst Lance Vitanza and a price target of $25. Overall, Opera is rated a Strong Buy by Wall Street analysts, with an average price target of $22.00, representing a potential upside of 59.65% from current levels.

The stock is trading at the lower end of its 52-week range and appears undervalued with a P/E ratio of 7.4x, below sector and industry averages.

Opera continues to gain momentum and market share as it invests in AI. With its discounted valuation and potential for growth, Opera presents an appealing opportunity for value investors.

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