Unity Software surges as it unveils AI marketplace, Wells Fargo starts coverage

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Unity Software (NYSE:U) shares surged more than 14% on Tuesday as investment firm Wells Fargo started coverage on the video game software company with an outperform rating and the company unveiled an AI marketplace.

Analyst Brian Fitzgerald, who also put a per-share price target of $48 on Unity Software (U) shares, noted that the questions about the metaverse and the ironSource acquisition cost have overshadowed a "meaningful mobile cross-sell opportunity," cost synergies and an increasing total addressable market, which creates an "attractive buying opportunity."

"We see a compelling opportunity for U to sell acquired ironSource monetization solutions (Grow) to its developer installed base (which generates 70%+ of mobile games on app stores) and think a unified platform (to develop, grow, manage, and monetize apps) is compelling in a still-fragmented ecosystem," Fitzgerald wrote in an investor note, adding the company could gain market share.

In addition, Fitzgerald said the company could gain even more cost synergies after the ironSource deal closed and potentially have an adjusted EBITDA of $250M by the fourth-quarter of fiscal 2024.

Earlier this month, Apple (AAPL) unveiled the Vision Pro, with Unity (U) apps running on the device during the presentation.

Separately on Tuesday, Unity (U) unveiled a dedicated place in the Unity Asset Store for AI-driven game development.

The AI marketplace will allow developers to get access to more AI solutions, including Verified Solutions, along with community-built solutions and new technologies.

More on Unity

• Unity Vs. Roblox: One Winner And One Loser
• Unity Software: Apple's Approval Boosts Growth Tailwind (Rating Upgrade)
• Apple unveils $3,500 AR/VR headset, biggest product launch in nearly a decade

Comments

[kpmedia]

Metaverse AI 5G XaaS whatever. And yet, Unreal is the leader, Unity is the follower. Unreal (Epic) is private, Unity is public. But that's not a reason to invest in it. It currently trades on ifs, hopes, and dreams. Not fundamental metrics.

[turner75024]

@kpmedia well said. Adjusted EBITDA, growth, AI, regret.

[Josh Borenstein]

Let’s gooooooo… soooooo I can break even one day on $U.

[alokjr]

@Josh Borenstein , i share the same dream. stuck on $51

[Benjamin Graham Cracker]

Every tech stock needs to be SaaS, into generative AI, and have a marketplace. Table stakes stuff here.

[Natturner1966]

Unity bought Weta Digital movie studio in 2021. We never here about it. Are they making money from it? Or catch and kill?

[ComputerBlue]

Option market loves a good pump

[Allen Greathouse]

One more reason why Unity is a winner… seekingalpha.com/...

[Stock Scanner]

What a joke. The company is losing $500 million a year. Employees will be happy to sell you all the shares you want.

[ComputerBlue]

@Stock Scanner fundies dont matter..just option flow...buy calls everyday, every week, forever

[Liquidity Swords]

@Stock Scanner Doubt that. Remember Adobe picked up Figma for $20B. Forget the metaverse stuff, all Unity needs to take off is an uptick in ad spending and positioning themselves at the forefront of AI in games.

[Stock Scanner]

@Liquid Swords Unfortunately, there isn't enough money to buy every overvalued POS. Yes, some like Figma will get bought (though I doubt they are losing hundreds of millions a year). Some will go bankrupt. Others will be in a zombie state with occasional pops.

[DONTIGNY]

Don't look at it tick by tick.
Hold for years to come.

John had probably the best AI double click during last earnings season, across Software space.

[Julian Lin]

quite bullish