Unity Software: An Inflection That Most Are Missing - Why I'm Long

Summary

  • Unity Software is undergoing a strategic transformation, shedding underperforming segments to become more focused, profitable, and efficient.
  • The Create and Grow segments are showing momentum, with Unity 6 adoption and the new AI-powered Vector ad platform driving improved performance.
  • I expect revenue growth to inflect positively by Q4 2025, with free cash flow reaching $350 million in 2025 and margins expanding steadily.
  • With expectations low and Unity trading at 33x forward FCF, I see a compelling risk/reward setup targeting $45 per share by summer 2026.
  • Looking for a helping hand in the market? Members of Deep Value Returns get exclusive ideas and guidance to navigate any climate. Learn More »
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Investment Thesis

Unity Software (NYSE:U) is one of my classic Inflection stocks. The business was on the cusp of a new narrative. And frankly speaking, as you'll soon see, I was a bit too early to recognize the inflection that was coming. My

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This article was written by

Michael Wiggins De Oliveira is an inflection investor. This means buying into cheap companies at the moment when their narrative is changing and the business is on a path toward becoming significantly more profitable over the next year.

With a focus on tech and “the Great Energy Transition (including uranium)”, Michael runs a concentrated portfolio with approximately 15 to 20 stocks and an average holding period of 18 months.

Through his 10+ years analyzing countless companies, Michael has accumulated outstanding professional experience in tech and energy and a following of over 40K on Seeking Alpha.

Michael is the leader of the Investing Group Deep Value Returns.

Features of the group include: Insights through his concentrated portfolio of value stocks, timely updates on stock picks, a weekly webinar for live advice, and "hand-holding" as-needed for new and experienced investors alike. Deep Value Returns also has an active, vibrant, and kind community easily accessible via chat.

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Seeking FCF is an associate of Michael Wiggins De Oliveira

Analyst’s Disclosure:I/we have a beneficial long position in the shares of U either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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