Unity Software (U) Q3 sales miss estimates, stock falls 7%

Unity Software Inc (NYSE: U) has seen a significant dip in its stock value, falling by 7.56% (-1.91) to trade at $23.34 as of November 10th, 09:40:24 GMT-5.

The decline follows the company’s third-quarter financial results, which failed to meet estimates, triggering concerns among investors.

Unity Software Q3 results miss estimates

Unity Software faced a setback as its third-quarter sales missed estimates, leading to a sharp drop in its stock on Friday.

Following the lower-than-expected Q3 financial results, the interim chief executive at the company has pledged corrective measures to steer the company back on course. The company has, however, refrained from providing guidance for the fourth quarter, signalling a strategic refocus to accelerate revenue growth and enhance profitability metrics.

Analyst perspectives on Unity’s Future

Stifel analysts, while maintaining a Buy rating on Unity Software stock, have adjusted the target price from $40 to $28, citing multiple compression and a more conservative growth outlook. Despite the recent challenges, Stifel sees potential in Unity’s expansion into non-gaming industries, particularly in use cases like Digital Twins.

Needham also maintains a Buy rating but has lowered the price target from $50 to $40 due to uncertainty surrounding “asset pruning.” Analysts Bernie McTernan and Stefanos Crist note the company’s shift towards profitability over the past 12-18 months and express confidence in management’s actions to drive shareholder value.

UBS Group AG (NYSE: UBS), adopting a Neutral rating, has a more cautious stance with a lowered price target of $25 (down from $38). The uncertainty surrounding Unity’s ongoing product portfolio review, which includes discontinuing certain offerings, workforce reductions, and office space reductions, has put UBS in a “wait and see” mode. Despite this, UBS acknowledges Unity’s commitment to creating a healthier growth and margin profile.

Unity Software’s stock movements and the cautious optimism expressed by analysts reflect the challenges and uncertainties the company currently faces. As the company refocuses and restructures, traders and investors will closely watch for any developments that could impact the company’s trajectory in the coming months.