PeskyMonkey
BofA upgraded Unity Software (NYSE:U) to Buy from Neutral and raised the price target on the shares to $56 from $46.
The analysts said that the upgrade was based on — their analysis which implies improved monetization of Unity’s industry leading mobile game creation engine; their view that mobile gaming advertising metrics have stabilized with easier comps in H2’23; and their belief that known risks and execution issues are more than priced into the stock.
In addition, the rating revision was also based on potential upside to FY24 and FY25 estimates.
Monetization of industry leading game creation engine Unity announced pricing and plan changes on Sept. 12 for Unity Runtime and Unity Plus customers. The stock has since traded down about 8% on fears related to potential creator churn, the analysts noted.
The analysts believe Unity’s incremental monetization opportunity outweighs the risks. The analysts project incremental revenue of $77M and $93M in 2025 from the company’s runtime fees and the retiring of Plus (net of expected churn), respectively.
The analysts also raised its FY24 and FY25 revenue estimates by 4.4% and 9.9% respectively based mainly on plan and pricing change analysis and a more constructive view on the company’s ad business.
Unity has a Strong Buy rating at Seeking Alpha’s Quant Rating system, which consistently beats the market. Meanwhile, the Seeking Alpha authors’ average rating is Buy and the average Wall Street analysts’ rating is also Buy.
U +2.83% to $36.72 premarket Sept. 15
