Goldman Sachs says buy this little-known internet stock with 50% upside

Published Wed, Dec 13 202311:00 AM ESTUpdated Wed, Dec 13 202311:40 AM EST

The growing digital advertising market and rapid advancements in generative artificial intelligence should benefit Opera, according to Goldman Sachs. Analyst Eric Sheridan initiated coverage of Norway-based Opera Limited with a buy rating and $16.50 price target. That forecast implies shares could gain nearly 51% over the next 12 months. Shares of Opera, which makes desktop and mobile web browsers and integrated content features, have popped more than 86% this year. The boom has been fueled by the company's improved profitability and product innovation, as well as its June announcement initiating a semiannual shareholder dividend program at 40 cents per share. Shares gained nearly 5% Wednesday. "We view Opera as positively levered to long-term secular tailwinds within digital advertising and idiosyncratically benefiting from geographic & product mix shift dynamics as a driver of sustained double-digit % growth over the next several years," Sheridan wrote in the Tuesday note. According to the analyst, Opera will get a boost from these three factors: The company has a large and growing total addressable market, which Goldman expects will reach roughly $667 billion by the end of 2026. Opera can "likely" achieve steady margin expansion in the coming years, as the company balances its marketing and headcount costs with its relatively fixed cost base. Opera can achieve more than 10% compound annual revenue growth by 2028, driven by the company's product and upside around AI advancements, such as Aria, in the long run. Opera announced its Opera One browser in April, which replaced its flagship browser to include a new user interface and a handful of AI-related advancements, including integration with AI chatbots. The company's Aria product is an AI chatbot within the Opera browser that leverages OpenAI's ChatGPT technology. "Opera's ability to continue to gain market share in key western markets and the overall industry competitive landscape (particularly with respect to generative AI over the long-term) are likely to be the biggest potential drivers of upside/downside volatility in the coming years," Sheridan wrote.