BofA Securities anticipates improved monetization at Unity Software (NYSE:U), and analysts today upgraded the stock from Neutral to Buy with a price target of $56. The price target implies upside of over 55%.
Analysts are positive on recent pricing changes and think risks for the company are well understood and are more than reflected in valuation.
The analysts explained, “Unity announced pricing and plan changes on September 12 for Unity Runtime and Unity Plus customers. The stock has since traded down roughly 8% on fears pertaining to potential creator churn. We believe U’s incremental monetization opportunity outweighs the risks.”
BofA raised 2024 and 2025 revenue estimates by 4.4% and 9.9%, respectively, based primarily on the plan and pricing change analysis, along with a more constructive view on its ad business.
Discussing risks for the company, the analysts said the bear case is based on software code and data ingestion issues that have since been resolved. There is also skepticism with regard to its ability to accelerate revenue growth, but this was addressed with recent pricing and plan action. Some investors are also concerned about mobile gaming trends despite signs of stabilization.
“We believe these risks are well understood and more than reflected in Unity’s valuation,” said the analysts.
Shares of Unity climbed 4% following the upgrade.