Unity's Decline Could Represent Buying Opportunity, Says Analyst

Unity (NYSE: U) shares sold off over 9% on Wednesday, ahead of its earnings release after the close.

That third quarter report saw the company beat loss per share and revenue expectations. The company posted an adjusted loss per share of $0.14 on revenue of $322.9 million, topping analyst expectations of a loss of $0.15 per share on revenue of $322.02 million.

Looking ahead, Unity raised its FY22 revenue guidance to between $1.365 billion and $1.385 billion, up from $1.3 billion to $1.35 billion, while it sees fourth-quarter revenue at $425 million to $445 million, above consensus expectations of $384.82 million.

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Unity shares are up around 1% premarket, but they have fallen 85% in 2022.

Still, Piper Sandler analyst Brent Bracelin sees a buying opportunity for patient investors.

The analyst cut the firm’s price target on Unity Software to $33 from $38, maintaining an Overweight rating on the stock. He explained in a research note that deteriorating gaming and advertising demand alongside the company’s completed ironSource merger has heightened investor controversy on Unity and pressured the company’s valuation.

He added that while execution risk could remain raised for the next two quarters, patient investors “could be rewarded by earnings and multiple expansion,” and he sees a buying opportunity in the stock on the ‘bad news.”