Zinger Key Points
- Unity Software posts disappointing Q3 revenue, partly due to runtime fee introduction headwinds continuing in October, one analyst says.
- There was limited visibility into “the nature and extent of management’s proposed interventions,” another analyst notes.
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Unity Software Inc U announced layoffs and cost-cutting plans after releasing its third-quarter earnings.
The results came amid an exciting earnings season. Here are some key analyst takeaways from the earnings release.
Stifel On Unity Software
Analyst Parker Lane maintained a Buy rating while slashing the price target from $40 to $28.
Unity Software reported its third-quarter revenues short of the consensus estimate, “in part due to the runtime fee introduction headwinds that bled into October,” Lane said in a note. Management indicated that these headwinds “are largely behind the company at this point,” he added.
Unity Software “told investors to expect changes to the company's product catalog over the next quarter or two, as the company looks to drive additional leverage and more sustainable growth,” the analyst further stated.
Wedbush On Unity Software
Analyst Michael Pachter reiterated an Outperform rating, while cutting the price target from $55 to $31.
“Unity suspended guidance as it begins a comprehensive assessment of its product portfolio and cost structure,” Pachter wrote in a note.
There was limited visibility into “the nature and extent of management’s proposed interventions” and the markets could “evolve slowly until there is a breakthrough either in approach or philosophy, but once the breakthrough occurs, we expect Unity to be in a position to capitalize immediately,” he added.
Check out other analyst stock ratings.
Needham On Unity Software
Analyst Bernie McTernan reaffirmed a Buy rating while reducing the price target from $50 to $40.
“We note the data points are piling up for U pivoting towards profitability over the past 12-18 months, and we think management is taking the right actions steering the ship this way, but there was a strong current to steer through,” McTernan said. There is “increased uncertainty in the announced asset pruning,” he added.
“In addition to the strategic actions announced, the reported adj. EBITDA results for 3Q were strong and showing progression against previous goals,” the analyst further stated.
Piper Sandler On Unity Software
Analyst Brent Bracelin maintained a Buy rating while slashing the price target from $30 to $20.
“The leadership transition with interim CEO that took over in early October and further business model transition announced tonight further elevate near-term execution risk,” Bracelin said in a note.
“Additionally, the company has suspended guidance limiting visibility into growth and margin outlook entering 2024,” he added.
Oppenheimer On Unity Software
Analyst Martin Yang reiterated a Perform rating on the stock.
“Looking beyond runtime fee, CEO change, portfolio optimization and guidance removal, Unity might have achieved, or has gotten really close to achieving an important milestone in 3Q23: profitability at Create,” Yang wrote.
“Attributing the entire 2Q23 adj. EBITDA to Grow Segment results in 37% margin, exceeding ironSource's peak margin of 36%,” he added.
U Price Action: Shares of Unity Software are up 3.01% to $26 at the time of publication Friday.
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