An increasing number of financial analysts are aligning their views with a positive outlook, or “bull thesis,” on Unity Software (U). Yesterday, the shares of this graphics software company experienced a 14% surge after Jefferies boosted its predicted price to $35.
This morning, I’ve noticed that three additional analysts have weighed in on Unity’s performance, leading to a 10.8% increase in its stock value before 9:55 a.m. Eastern Time.
Valuing Unity stock
This morning, I’m buzzing with excitement as I share some intriguing updates about Unity stock! UBS has boosted their price target to a whopping $33, maintaining a neutral rating. On the other hand, Wedbush is really confident in its outlook, bumping up their price target to an impressive $39! Lastly, Morgan Stanley served us with a mix of good and not-so-good news: they’ve raised their price target, but didn’t specify the exact figure or their recommendation. Keep your eyes on this stock, folks – it’s shaping up to be quite the ride!
Today, Morgan Stanley analyst Matthew Cost pens an optimistic note on The Fly, highlighting a significant enhancement in the performance of Unity Ads. According to his observations, these ads have witnessed a surge of 15% to 20%. This improvement, as Cost explains, is due to the more competitive ad product that Unity has developed, which is now driving substantial sales growth.
Is Unity stock a buy?
However, it’s unusual because even though Unity stock gets an overweight rating from Cost, their price target is just $25, which is lower than the current price of $38. So, what should investors infer from this?
It’s possible that Morgan Stanley accidentally undervalued Unity’s stock. Another interpretation of their statement could be that they believe Unity would be a good investment, but at an appropriate cost. This is a viewpoint I share as well.
Considering Unity’s current free cash flow of $308 million and a market capitalization of $15.8 billion, its stock price currently stands at a high 51 times its free cash flow ratio. This appears costly considering most analysts expect the company to increase its free cash flow by approximately 26% annually over the next five years. However, if the stock’s price were to decrease by around 35%, bringing it down to roughly $25 per share and a market cap of about $10.4 billion, or 33.5 times its free cash flow, the valuation seems more appealing.
At that price, I might even buy some myself.
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2025-07-18 00:20