![]() ![]() What is the Price Target for Unity Software Stock?ĭespite the decline, the Wall Street community continues to be optimistic about Unity Software stock. Yet, it is trading at much lower levels compared to the 30x average EV/sales valuation in the last 18 months. Nonetheless, the premium is justified given its favorable industry-leading position, diversified revenue stream, and larger total addressable market or TAM.Īt present, the company is trading at an EV/sales ratio of 8.8x, higher than the peer group average of 2.7x. In terms of valuation, Unity has mostly traded at a premium to its peers. Trading at low valuations, Unity is an attractive takeover candidate and could receive another offer in the coming months. The gaming industry is undergoing consolidation, and a few M&As have already taken place. ![]() Important to note, Unity is trading at a ~38% discount to the offer price made by AppLoving back in August. It is worth noting that back In 2015, there was speculation that Meta Platforms’ ( NASDAQ: META) CEO Mark Zuckerberg was in favor of acquiring Unity. Unity, instead, went ahead with its synergistic acquisition of ironSource. However, Unity’s Board rejected the offer as the deal required Unity to terminate its deal to acquire ironSource (IS) for $4.4 billion. ![]() The all-stock transaction valued Unity at $58.85/share ($20 billion enterprise value). In August, Unity received an offer to be acquired by competitor AppLovin ( NASDAQ:APP). Unity will continue to leverage its unique positioning by continuously building new services on top of its platform and cross-sell them to its loyal customer base. Over the years, Unity has created a comprehensive end-to-end gaming platform that provides game creation as well as monetization and operational services. Strong revenue growth will likely continue, given multiple opportunities. In the past three years, revenues have grown at a 43% compound annual growth rate (CAGR) to reach $1.1 billion in 2021. It has built a strong brand and a gigantic, loyal customer base with a 99% customer retention rate. In fact, in 2021, 70% of the top 1,000 mobile games and 50% of all video games were made with Unity. Within the mobile gaming software space, Unity has a strong first-mover advantage. The gaming industry has grown at double-digit numbers in the past five years and was worth ~$214 billion by the end of 2021. Market-Leading Brand with an Impressive Customer Base Further, there is still no clarity on when the firm will become profitable. Despite that, the company is not yet profitable. The company crossed the $1 billion milestone in revenues in 2021 with an impressive 43.8% year-over-year growth rate. Investors should consider buying the stock based on its huge competitive moat and high long-term profitability prospects.īased in the U.S., Unity is the world’s largest software platform that is used to create video games. However, the stock has gained 24% over the past month and is on the verge of a turnaround. The uncertain macro situation made investors downgrade high-growth, money-losing tech companies like Unity. It is trading far below its high of $200 seen in November 2021. Over the past year, the stock has lost 80% of its market capitalization. With the overall tech space bloodbath in recent months, one stock that has taken a massive hit is Unity Software ( NYSE:U). ![]()
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