Unity Software(U)2024-08-12 11:03Investment Rating - The report maintains a "Buy" rating for Unity (U.US) with a target price adjusted to $20, reflecting a potential upside of 29% from the current price of $15.54 [3][5]. Core Insights - Unity's Q2 2024 revenue reached $449 million, aligning with expectations, while strategic segment revenue was $426 million, and adjusted EBITDA was $113 million, both exceeding prior guidance. However, the company has lowered its full-year guidance for 2024 due to cautious outlook on the recovery of its Grow business and increased investments [2][3]. - The Create Solutions segment showed stable growth with Q2 revenue of $129 million, a 4% year-over-year increase, driven by a 14% rise in subscription revenue. The upcoming release of Unity 6 is anticipated to be a growth driver for the company [2][3]. - The Grow Solutions segment continues to face challenges, with Q2 revenue of $296 million, a 9% year-over-year decline. The company is enhancing its advertising technology capabilities and has appointed a new Chief Product Officer to revitalize its advertising business [2][3]. Financial Summary - For FY 2024, Unity's projected revenue is $1.763 billion, down from previous guidance of $1.760-$1.800 billion, reflecting a year-over-year decline of 2%-3%. Adjusted EBITDA is expected to be between $340 million and $350 million, down from earlier estimates of $400 million to $425 million [3][4]. - The forecasted financial metrics include a revenue increase from $1.391 billion in FY 2022 to $1.763 billion in FY 2024, with adjusted EBITDA improving from a loss of $71 million in FY 2022 to a projected $405 million in FY 2025 [4][8]. - The report highlights a significant decline in net profit projections, with expected losses of $737 million in FY 2024 and $474 million in FY 2025, indicating ongoing challenges in profitability [8][9].