Unity Software Company Overview
Zacks Rank #3 (Hold) stock Unity Software (U) is a leading platform for creating interactive, real-time 3D content. Though Unity Software is most recognized for video game development, the company’s tools are implemented across various industries, including film, animation, automotive, architecture, and more. Unity’s products provide clients with many features that allow them to design, develop, and deploy interactive experiences on multiple platforms, from mobile devices and consoles to virtual and augmented reality headsets.
Unity Smashes Earnings Expectations
There is no more significant stock catalyst on Wall Street than a strong earnings report, and on Wednesday night, Unity Software delivered the goods. Sales of $457M beat estimates of $433M, while EBITDA of $106M crushed Wall Street expectations of $85 million amid increased revenue from the company’s core offerings. CEO Matt Bromberg: "Our Q4 results exceeded expectations in both revenue and profitability, reflecting our efforts to build a stronger Unity. With the success of Unity 6, a new pricing model, and growing AI integration, we’re optimistic about our future and committed to delivering value to our customers and shareholders."
Breakaway Gap Above Pivot
When a stock like U gaps up as much as it did this morning, investors may feel they are chasing if they don’t already own shares. However, a strong earnings report, a high short interest (~8% of the float is short), and a rotation on higher time frames (monthly bullish engulfing candle) often lead to much higher prices. Meanwhile, U is attempting to break out of a double-bottom base structure as volume swells to ~900% above the 50-day average here intraday.
Image Source: TradingView
Meanwhile, the January highs give us a level to “trade against” and manage risk.
Apple Vision Pro + Unity Software
In 2023, Unity partnered with Apple (AAPL) to provide 3D apps for the company’s “Vision Pro” headset. Unity’s Apple business is growing, and some highlights of successful Vision Pro projects include:
- Don Julio App: Trigger XR used Unity to create an immersive experience showcasing the tequila brand's history and craftsmanship.
- LEGO Builder's Journey: Light Brick Studio leveraged Unity to bring their game to Vision Pro, overcoming rendering and optimization challenges.
Management Uncertainties Answered
Investors never like uncertainty, especially when it comes to management teams. Unity quelled those concerns this quarter by hiring in key leadership positions, including a new CTO and CFO.
AI Will Drive Growth at Unity Software
The enormous strides in AI technology over the past few years are an essential part of the U bull case. AI will help Unity to develop and optimize its gaming segment, while making it more efficient and cheaper.
Bottom Line
Unity Software’s recent earnings beat, breakaway gap, and leadership certainty signal a bright future for the stock over the next 6-12 months.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
