Don't Overlook Unity: Why This Stock Could Be Ready to Soar

Core Insights - Unity Software Inc. is a leading platform for creating and managing real-time 3D content, with its game engine used in nearly 50% of all video games and 70% of the top 1,000 mobile games globally [1][3] Company Overview - Unity's stock is currently priced at $16.72, down 2.62% from previous levels, with a 52-week range between $13.90 and $43.54 [3] - The company faced significant backlash after implementing a "runtime fee" in July 2023, which led to a stock price collapse from $47.16 to an all-time low of $13.90 on August 7, 2024 [3][5] Recent Developments - Following the runtime fee incident, Unity's CEO, John Riccitiello, publicly apologized and resigned [5][6] - The revised runtime fee policy applies to games made on Unity 6 or higher, exempting developers using Unity Personal Edition until they earn $200,000 in revenue [6] - The fee structure is designed to protect smaller developers while still generating revenue from larger studios [6] Financial Performance - Unity's Create Solutions segment saw a 4% year-over-year revenue growth, with core subscriptions increasing by 14% year-over-year [7] - In Q2 2024, Unity reported losses of $0.32 per share, missing consensus estimates, while revenues slid 15.8% year-over-year to $449.3 million, but core strategic portfolio revenue rose 6% year-over-year to $426 million [9] - For Q3 2024, Unity expects strategic portfolio revenue between $415 million and $420 million, with adjusted EBITDA between $75 million and $80 million [10] Market Outlook - Morgan Stanley upgraded Unity stock to Overweight from Equal Weight, setting a price target of $22, citing reduced risk from the guidance cut and Unity's strong market share in mobile gaming [11] - The average consensus price target for Unity is $26.46, with a high forecast of $56.00 [13]