U - Cathie Wood Bought the Dip in This Gaming Stock. Should You?
2023-10-31 07:23:00 ET
Video game company Unity Software (NYSE: U) is not having a good month. The company's CEO resigned in rather humiliating fashion after a botched attempt to change its pricing model, which was met with massive backlash from developers. Moreover, the stock is down 20% in just the last month as investor concerns rise over revenue growth and a bloated expense profile.
Ark Invest CEO Cathie Wood has taken advantage of the cratering stock price and has been adding to Ark's position in Unity. While speculation is rising that Unity may be acquired , I think there are plenty of other reasons to own the stock. And although its current financial profile may appear concerning on the surface, there is much more than meets the eye. Let's dig into the business and assess this opportunity to buy the dip .
Unity Software can be classified as a software-as-a-service ( SaaS ) business. SaaS businesses often report key metrics beyond traditional figures found on financial statements. One such metric is net dollar expansion rate (also commonly referred to as net dollar retention rate). This metric tells investors how much the company's revenue is growing among its existing customers. Ideally, investors would like to see net dollar expansion in excess of 100% as that implies the company is upselling clients and expanding the business it does with them over time. The table below illustrates Unity's net dollar expansion rate over the last year.
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Cathie Wood Bought the Dip in This Gaming Stock. Should You?