Unity paid ‘astonishing’ price for ironSource, says Benchmark

Benchmark analyst Mike Hickey reiterates a Sell rating on Unity (U) with a $27 price target after the company announced the acquisition of ironSource (IS) in an all-stock transaction worth $4.4B. Unity paid an “astonishing” 35-times consensus view of fiscal 2022 adjusted EBITDA, Hickey tells investors in a research note. The analyst is “cautious on an aggressive acquisition strategy that overpays for aspirational growth targets that don’t deliver, in a market demanding productive assets at disciplined prices.” He does not believe the Unity executive team is credible and highlights the CEO’s tenure at Electronic Arts (EA), “where we witnessed a reckless acquisition strategy that failed to deliver growth and ultimately led to value destruction.”