Unity Software Inc. shares rose Wednesday after analysts applauded the gaming-software company’s growth and its ability to dodge a major change Apple Inc. made to online advertisements.
Wedbush analyst Michael Pachter, who has an outperform rating and raised his price target to $129 from $125, expects “significant top-line growth for several years” from Unity after it pulled off an end-around with Apple Inc. AAPL,
Pachter noted that Unity’s Operate Solutions business, which helps developers make money on their games and content through ads, drove much of the company’s growth as it worked around the IDFA change by using ad models that didn’t rely on data from Apple but used data from an end user’s engagement and platform performance data.
“As a result, the Unity platform is able to analyze 50 billion in-app events on a daily basis across 20 different platforms, offering customers access to vast amounts of data,” Pachter said.
Stifel analyst Tom Roderick, who has a buy rating and raised his target price to $135 from $125, said “if there was any controversy to find around Unity, it was most certainly the question of whether or not IDFA would create a genuine headwind for the company.”
“The controversy from here will be the forward guide, as it calls for a sequential revenue downtick in Q3, though we think traditional back to school seasonality and broader conservatism puts keeps this beat and raise story right on track,” Roderick said.
Barclays analyst Mario Lu, who has an equal weight rating and raised his price target to $105 from $90, expects Unity to continue to benefit as digital advertising changes.
“We think Unity will likely stand to continue to benefit from the changing advertising ecosystem due to being able to leverage data from 3B+ [monthly active users] using Unity developed apps to generate better ROI compared to its peers,” Lu said.
Of the announced acquisition, Lu said Parsec “enables companies to work together anywhere, particularly useful in handling rigorous processes such as the Unity Engine, allowing Unity to increase its pace of adoption in both gaming and verticals outside of gaming such as entertainment and architecture.”
Oppenheimer analyst Martin Yang, who has an outperform rating, said he was encouraged in the uptick of nongaming customers using Unity to use digital content to attract customers.
“We are encouraged by management’s M&A activities to augment its products and game engine features targeted at vertical customers, which may provide usage-based revenue streams in addition to per seat based subscription sales,” Yang said.
Of the 12 analysts that cover Unity, nine have buy ratings, two have hold ratings, and one has a sell rating. Of those, five analysts hiked their price targets resulting in an average $130.64, up from a previous average of $124.80, according to FactSet data.