We came across a bullish thesis on Unity Software Inc. (U) on wallstreetbets Subredddit Page by GradientOGames. In this article, we will summarise the bulls’ thesis on U. Unity Software Inc. (U)’s share was trading at $23.53 as of Nov 22nd.
An office of software engineers and designers collaborating on a digital project.
Unity Software Inc. (U) is making a comeback after a rough few years marked by poor decisions and big leadership changes. Known for its game engine, the company lost its way by focusing too much on advertising and making questionable mergers, like with IronSource and Weta Digital. Things got worse with the introduction of a runtime fee that angered users and led to the CEO stepping down. New leadership under Jim Whitehurst and later Matthew Bromberg has shifted the company’s focus back to its core product: the game engine.
Recently, Unity has worked hard to win back trust. They launched Unity 6, moving away from yearly updates to focus on making better, more reliable improvements. The new version promises faster performance and introduces useful AI tools for both game developers and advertising. These AI features aim to help developers create better games and make advertising more effective, showing Unity’s renewed focus on helping its users succeed.
Financially, Unity is bouncing back. After struggling in late 2023 with missed earnings, the company has started to beat expectations. In Q3 2024, it reported $92 million in EBITDA, far above its forecast. Revenue from its engine grew 5% year-over-year, and the company is on track to be profitable within the next two years. The cancellation of the runtime fee and better communication with the community have also helped reignite growth.
Unity’s new leadership is steering the company in the right direction. By focusing on its engine, supporting older features, and introducing helpful new technologies, Unity is rebuilding its reputation. If this progress continues, the company has a strong chance to become the top choice for game developers again, offering solid growth opportunities for investors.
Unity Software Inc. (U) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 35 hedge fund portfolios held U at the end of the third quarter which was 34 in the previous quarter. While we acknowledge the risk and potential of U as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than U but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.