U - Unity: Gaming Platform Leader's Painful Reset Could Spark A Revival

2024-04-24 11:30:00 ET

Summary

• Unity's reset plan has unnerved investors, leading to pessimism and concerns over its ability to focus on its growth strategy.
• Unity is still the gaming platform leader and its headwinds could peak in the first half.
• The integration with ironSource is expected to be completed, broadening its ad revenue monetization sources.
• With U possibly looking to bottom out at the $22 level, investors should consider buying before the market realizes it.

Unity's Reset Plan Unnerved Investors

My bullish thesis on Unity Software Inc. ( U ) has not turned out well. The market reacted with pessimism over Unity's portfolio reset , intensifying the execution risks. Wall Street analysts are also mixed in their views of assessing Unity's ability to rejuvenate its growth thesis as it attempts to chart a new growth trajectory away from ex-CEO John Riccitiello. With the ongoing search for a permanent CEO, I believe the market's concerns over Unity's ability to focus on its two-phase reset strategy could face more uncertainties. Moreover, despite its relative underperformance, U isn't valued at a steep discount ("C" valuation grade). As a result, I believe the market would likely place Unity in the penalty box for 2024 as investors reassess the reliability of Unity's ability to return to growth....

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