What happened
Shares of 3D software company Unity Software (NYSE: U) jumped in Monday trading, gaining 9.2% as of 3:25 p.m. ET.
There's no obvious news driving the stock up today -- but there was some news last week.
Image source: Getty Images.
So what
Specifically, in a mid-day note Friday, investment bank Citigroup suggested that the eventual size of the metaverse could be anywhere from $8 trillion to $13 trillion. That estimate didn't do much good for Unity on Friday when the stock slipped a small fraction of one percent. Today, however, investors seem to be clueing in to the opportunity for Unity to capitalize on selling 3D software for use in building the metaverse.
According to Citi, the "gaming, commerce, art, media, advertising, smart manufacturing, healthcare, virtual communities, and social collaboration" possibilities could all eventually attract anywhere from one billion to five billion users into a future metaverse either through dedicated virtual reality devices or simply through smartphones.
Now what
In the meantime, Unity Software could remain a tricky stock to own. On the one hand, the company is growing its revenues nicely -- up roughly twice in size over the last two years. Also, free cash flow is expected to turn positive this year (at least according to analysts polled by S&P Global Market Intelligence).
On the other hand, it could be a very long time before Unity begins generating any positive earnings as calculated according to generally accepted accounting principles (GAAP). On average, analysts don't forecast GAAP earnings to turn positive for Unity before 2027 at the earliest.
Until Unity reaches that happy point at which it's generating consistent, reliable profit, investors can expect continued volatility in Unity Software stock.
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Unity Software Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
