U - Unity Software Q2 Preview: Uncertain Turnaround In Progress - Reiterate Speculative Buy

2024-07-04 09:00:00 ET

Summary

• U's prospects remain highly speculative going into FQ2'24 earnings call in August 2024, as the stock continues to lose much of its value.
• Despite the mixed FQ1'24 performance and underwhelming FQ2'24 guidance, the management remains confident about its FY2024 guidance.
• The new CEO is also notably experienced in gaming management, with it potentially bringing forth a clean slate and renewed faith amongst market analysts/ gaming developers.
• While short interest has moderated, it is undeniable that the stock may remain volatile moving forward, for so long that a bottom has yet to be found and the business' performance metrics disappoint.
• However, we believe that the U stock looks relatively cheap here, with it offering a speculative growth play, assuming a successful turnaround ahead.

U's Investment Thesis Remains Speculative

We previously covered Unity Software Inc. ( U ) in April 2024, discussing why the stock remained speculative in the intermediate term, with it uncertain if the business reset might be successful in boosting its top/bottom lines while convincing developers to return.

However, with the stock seemingly well supported at $26s, it appeared that there might be an improved margin of safety for those looking to add, for so long that the portfolio was sized according to their risk appetite....

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