Unity Stock Is Rallying On Guidance Beat – But Analysts Are Split On Valuation

• BofA analyst Omar Dessouky raised the target to $21, noting that the IronSource wind-down was largely anticipated.
• BTIG’s Clark Lampen lowered the price target slightly to $39 from $41 but maintained a ‘Buy’ rating.
• On Thursday, the company raised its Q1 revenue guidance to $505 million – $508 million.

Unity Software Inc. (U) is seeing mixed analyst reactions following its first-quarter guidance, with investors closely watching the performance of its Vector segment and the planned exit from the ironSource Ad Network.

On Thursday, the company raised its Q1 revenue guidance to $505 million – $508 million, surpassing both prior estimates of $480M–$490M and analyst expectations of $488.69 million, according to Fiscal AI.

Analysts React To Strong Q1 Vector Growth

After Unity reported Q1 guidance, analysts have adjusted their price targets. Morgan Stanley raised its price target to $32 from $30 while maintaining an ‘Overweight’ rating, citing 78% year-over-year growth in Vector and 15% sequential growth, according to TheFly.  

The firm highlighted the upcoming exit from the ironSource Ad Network as a catalyst for improved margins and EBITDA. 

BofA analyst Omar Dessouky raised the target to $21 from $19, keeping a Neutral rating, noting that the ironSource wind-down was largely anticipated and that Vector’s quarter-over-quarter growth of 15% outpaced guidance of roughly 10%. 

"Unity Vector continues to deliver robust growth each quarter, driving results meaningfully above our guidance. Today’s actions will accelerate Vector’s impact on our business, enhancing both revenue growth and profitability,” said CEO Matt Bromberg.

Unity stock traded over 12% higher on Friday morning. On Stocktwits, retail sentiment around the stock jumped to ‘extremely bullish’ from ‘bearish’ territory the previous day. Message volume shifted to ‘extremely high’ from ‘low’ levels in 24 hours. 

Varied Price Targets Reflect Different Modeling Approaches

While some analysts increased their targets, others reduced theirs despite the strong guidance. BTIG’s Clark Lampen lowered the price target slightly to $39 from $41 but maintained a ‘Buy’ rating, citing strong revenue and EBITDA driven by Vector performance while adjusting the model with a minor multiple reduction. 

Wells Fargo also cut its target to $29 from $38, keeping an ‘Overweight’ stance, acknowledging revenue and EBITDA beats of 3% and 22% respectively, and updating assumptions for Q1 pre-announcement and the ironSource deprecation.

U stock has declined by over 61% year-to-date. 

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