Unity Stock (NYSE:U)
On Tuesday, shares of Unity Software Inc. (NYSE:U) increased after the announcement that Wells Fargo has begun coverage of the company with an Overweight rating. A price objective of $48 has been set for the Unity stock by Wells Fargo, which indicates potential growth of 30% from yesterday’s closing price.
In recent weeks, shares have increased after Apple (NASDAQ:AAPL) referenced its 3D applications during its Vision Pro presentation in June. However, Wells Fargo’s decision to maintain an Overweight rating on the Unity stock was not based on “metaverse hype.” It was predicated on analysts’ expectations for more consistent execution and increases in market share after the purchase of ironSource by Unity.
Wells Fargo analysts said, “We rate Unity stock Overweight, given the strength and entrenched nature of its core gaming business, which was boosted by its acquisition of ironSource, which we expect to drive significant top-line synergy and market share gains even in a soft digital ad market, and the significant opportunity in non-gaming verticals as Industry adopts RT3D and digital twins across a range of use cases, especially given recent developments in AI (where we are bullish).”
According to Wells Fargo, the near-term outlook provided by management suggests some trepidation regarding the state of the macroeconomic environment and the advertising industry. However, the predictions considered by the consensus already reflect some doubt, creating an opportunity for the firm over the next few quarters if it can achieve better results than projected.
“Metaverse hype has quickly subsided amid macro deterioration (multiple contractions from 34x NTM consensus sales in Nov ’21 to less than 8x today),” the analysts said. “However, we see U’s utilitarian ‘digital twin’ applications driving meaningful outcomes in Industry, where it is well positioned to drive adoption.”
After receiving the new buy recommendation, Unity stock increased by more than 11%.
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Author Shariq Khan 
