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Piper Sandler boosts Unity Software shares after 35% YTD plunge

EditorEmilio Ghigini
Published 2024-02-27, 04:06 a/m
Updated 2024-02-27, 04:06 a/m
© Reuters.

On Tuesday, Piper Sandler shifted its stance on Unity Software (NYSE:U), moving from an Underweight to a Neutral rating, while also adjusting the price target for the shares to $30.00 from the previous $35.00.

The revision comes after recognizing a significant downturn in the company’s year-to-date performance, with shares falling by 35%, in contrast to the S&P 500's 6% rise.

The analyst noted that entering 2024, there was a concern that Unity Software's investor sentiment and valuation were overly optimistic, given the company's strategic portfolio changes and the 30% fourth-quarter surge in its share price. This surge had inflated the forward-looking enterprise value to EBITDA multiple to 26 times.

However, the company's growth expectations for 2024 have been recalibrated to a mid-point of 3%, which is lower than the 9% consensus. This adjustment suggests that Unity's strategic base growth potential may not meet initial expectations, potentially affecting its valuation multiple until growth picks up again.

The upgrade to a Neutral rating is based on a more balanced risk-reward outlook, considering the recent share price drop and the recalibrated growth and valuation expectations.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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