Shares of Unity Software (NYSE: U) Have had a beating in recent years. They fall 90% compared to their peak in 2021. But Wall Street analysts are generally bullish about the passage perspectives of the company.
JMP Securities -analyst Andrew Boone recently upgraded the share to make it better (buy) with a price target of $ 30, which implies 36% an increase in the current $ 21.95 stock price. This is slightly higher than the average price objective of 12 months of Wall Street of $ 28.95. Here is the question that investors have to ask: is there a catalyst that could improve the financial results of the company to send the share higher this year?
In the past year, Unity has entered into various challenges that have led to falling income. The company terminated its subscription agreement with computer animation company WETA FX, made changes to its product range and was confronted with increasing competition in its advertising company.
While sales fell by 17% in 2024, the financial results of the fourth quarter were better than expected. The new advertising network of Unity Vector, powered by Artificial Intelligence (AI), is expected to strengthen its competitive position and increase the long-term growth views.
The launch of the new graphic engine of Unity, Unity 6, is another catalyst to watch. The turnover of the subscription grew by 15% year after year in the quarter, with Unity 6 being downloaded 2.8 million times since the release. Unity also continues to make progress when expanding its company further than gaming, with growing acceptance in car and retail trade.
Nevertheless, analysts expect that Unity’s turnover will fall by 2% this year before they grow by 10% in 2026. If the new advertising network and the game engine unit can help to return to growth this year, the shares can climb back to the price target of the $ 30 analysts.
However, management noted that it will take time before Unity Vector will show positive results for the company. A bigger problem is profitability. Because analysts still expect that Unity reports losing on the Bottom Line this year, it is also possible that the shares can continue to perform unless there is a considerable gear in sales growth.
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