Unity Software Inc (NYSE:U) is “playing the long game,” over the long-term well-positioned to be the primary real-time 3D content provider in gaming and industries beyond, according to analysts at Wedbush Securities.
Following the release of Unity’s 4Q results, the analysts wrote in a note to clients that they were maintaining their ‘Outperform’ rating on the stock with a 12-month price target of US$45, reflecting an EV/revenue multiple of roughly 8x their FY24 revenue estimate of $2.7 billion.
Unity's shares were trading down about 18.3% at US$30.92 on Thursday afternoon.
READ: Unity Software 4Q results could underwhelm, broker says
The analysts wrote that in 4Q Unity’s total revenue was $451 million, compared to their estimate of $445 million, the consensus expectation of $439 million, and guidance of $425 million-$445 million.
Unity achieved its first profitable quarter as a public company with non-GAAP operating income of $13 million, compared with their estimate of $15 million, the consensus expectation of $12 million, and guidance of $5 million to $15 million, the analysts noted.
They highlighted that Unity’s Grow Solutions continues to experience headwinds due to macroeconomic pressures causing softness in the ad market.
Looking at 2023, Wedbush’s analysts wrote that 1Q23 and FY23 guidance were better than feared.
“It is clear from company guidance that Unity expects one more challenging quarter, sequential revenue decline and low digital adjusted earnings before interest, taxes, depreciation, and amortization (AEBITDA), followed by accelerating revenue and margin growth for the remainder of the year,” the analysts wrote.
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