Unity Software(US:U)2024-11-11 02:45Investment Rating - The report maintains a "Buy" rating for Unity (U.US) with a target price raised to $25, indicating a potential upside of 29% from the current price of $22.21 [4][7][18]. Core Insights - Unity's Q3 2024 revenue reached $447 million, exceeding market expectations of $410 million. The strategic revenue segment was $429 million, showing a 2% year-over-year decline. Adjusted EBITDA was $92 million, also above prior guidance. The company has raised its Q4 guidance, expecting strategic revenue between $422 million and $427 million, corresponding to a 0%-1% year-over-year growth [2][4]. - Subscription revenue continues to show double-digit growth, with Q3 2024 Create Solutions revenue at $132 million, a 5% year-over-year increase. The company has shifted back to a seat-based subscription model, which is expected to enhance revenue predictability and developer adoption [3][4]. - Unity's advertising segment is making positive strides, with Q3 2024 Grow Solutions revenue at $298 million, a 5% year-over-year decline. The company is investing in a new data platform to improve user acquisition and monetization performance [4]. Financial Summary - For FY 2024E, Unity's revenue is projected at $1.787 billion, with adjusted EBITDA margin expected to be 21%. For FY 2025E, revenue is forecasted at $1.805 billion, with an adjusted EBITDA margin of 23% [6][10]. - The company reported a total revenue of $1.391 billion in FY 2022, which increased to $2.187 billion in FY 2023. However, a decline is expected in FY 2024E, followed by a slight recovery in FY 2025E and FY 2026E [10][11].