A week ago, Opera Limited (NASDAQ:OPRA) came out with a strong set of third-quarter numbers that could potentially lead to a re-rate of the stock. Revenue and earnings both blasted past expectations, with revenue of US$94m beating expectations by 21% and earnings per share (EPS) reaching US$0.25, some 1150% ahead of expectations. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Taking into account the latest results, the most recent consensus for Opera from three analysts is for revenues of US$386.0m in 2020, which is a sizeable 51% increase on its sales over the past 12 months. Earnings per share are expected to accumulate 7.0% to US$0.46. Yet prior to the latest earnings, analysts had been forecasting revenues of US$359.7m and earnings per share (EPS) of US$0.41 in 2020. So it seems there's been a definite increase in optimism about Opera's future following the latest results, with a decent improvement in the earnings per share forecasts in particular.
With these upgrades, we're not surprised to see that analysts have lifted their price target 34% to US$17.25 per share. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Opera at US$21.00 per share, while the most bearish prices it at US$14.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Opera's past performance and to peers in the same market. Analysts are definitely expecting Opera's growth to accelerate, with the forecast 51% growth ranking favourably alongside historical growth of 28% per annum over the past three years. Compare this with other companies in the same market, which are forecast to grow their revenue 12% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Opera is expected to grow much faster than its market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Opera following these results. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Opera. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Opera analysts - going out to 2021, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.