Unity Software Inc (NYSE:U) saw its price target boosted by Wedbush analysts to $55 from $50, who also added the company to its Best Ideas List, citing strengthening momentum across its game engine and mobile advertising businesses.
Unity shares traded up 4.8% at about $45 on Tuesday afternoon.
Wedbush reiterated its ‘Outperform’ rating on the stock, arguing that Unity remains well-positioned for sustained top- and bottom-line growth.
“We are adding Unity to Wedbush’s Best Idea List, as Unity holds a strong position in the expanding game engine and mobile advertising markets, which should support sustained revenue and profit growth over the coming years,” the analysts wrote.
The firm said it views Unity shares as undervalued given the company’s competitive position and improving fundamentals.
The analysts noted that ongoing enhancements to Unity’s ad platform, improvements to its core engine, and the launch of new alternative payment tools “position the company for meaningful long-term expansion.”
Wedbush also highlighted Unity’s entrenched position in the game engine market, pointing to data showing that more than 70% of the top 1,000 mobile games are built using Unity.
According to the analysts, the broader game engine market is expected to grow at a compound annual rate of at least 15% over the next five years.
“We expect Unity to maintain this market share into the future,” the analysts wrote, adding that the company may gain modest share as large publishers shift from in-house engines and as Unity deepens its partnership with Epic Games.
The firm wrote that Unity’s Commerce Platform could support incremental high-margin revenue as developers adopt its plug-and-play setup.
Wedbush also suggested that the company has room to raise prices in the coming years as it rolls out further technical upgrades. The analysts see Unity’s current projections for its Create segment, roughly 6% growth next year and 4% the following year, as “conservative.”
Wedbush was more optimistic about the company’s Grow Solutions segment, saying it should outpace Create thanks to mobile advertising trends, product improvements, and network effects.
The analysts pointed to encouraging early results from Unity’s Vector product, noting “15% to 20% increases in app installations and IAP spend from acquired users.” The inclusion of runtime data expected in 2026 should further improve the model.
The firm said rising eCPMs, enabled by better targeting technologies at Unity and rival AppLovin, are benefiting mediation platforms such as LevelPlay.
It also expects Unity’s partnership with Epic Games to draw more developers into the ecosystem and expand developer margins through its commerce offerings. “The collaboration and expanded margins should lead to higher spending within the Grow platform,” the analysts wrote.