To The Moon

Stocks closed lower Friday, a day after the S&P 500 $S&P 500(.SPX)$ posted a new record high, following the announcement of a 35% tariff on Canada.

Considering the different perceptions of the stock, this time TigerPicks chose $Unity Software Inc.(U)$ to have a fundamental highlight to help users understand it better.

$Unity Software Inc.(U)$

Unity Software Inc. creates and operates an interactive real-time 3D content platform. Its platform provides software solutions to create, run, and monetize interactive, real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices.

The company serves content creators and developers, artists, designers, engineers, and architects to create interactive and real-time 2D and 3D content. It offers its solutions directly through its online store, field sales operations, independent distributors, and resellers.

Create and Grow

Unity is the platform a lot of people use to build and run games—and not just little side projects. Big, real games. Its business is split into two main parts: Create and Grow.

The Create side is all about helping developers actually build games and digital experiences. It gives them tools to design, develop, and ship games across all kinds of devices—from mobile phones to VR headsets to consoles like Nintendo Switch.

Then there’s Grow, which helps developers make money from the games they’ve built. This side focuses on things like in-game ads, analytics, and user acquisition—basically helping developers get more players and make more revenue from those players.

Right now, Unity’s in much better shape than it was a year ago. They’ve gone through a big restructure—cutting back on parts of the business that weren’t core—and now they’re more focused on their strengths: the Create and Grow segments. On the Create side, Unity 6 is already seeing strong adoption, and a new version, Unity 6.1, is helping developers build for even more platforms. That’s pulling in more subscribers and giving Unity solid growth.

On the Grow side, the real story is Vector—their new AI-powered ad platform. It’s already rolled out across iOS and Android, and early results are strong: 15-20% better performance on installs and in-app purchases compared to the old system. That’s a big deal for developers and advertisers.

Given that background, let's now discuss its fundamentals.

Revenue Growth Rates

U revenue growth rates

On the surface, it looks like Unity is just guiding for another weak quarter of revenue growth—especially after posting several quarters of declining revenue. But look a little closer, and there's more going on.

Much of that decline is intentional. Unity is shutting down its non-strategic operations to become a leaner, more focused business centered around its Create and Grow segments.

We’re likely looking at one final quarter of negative year-over-year revenue growth. But by Q3 2025, the business could be back to flat revenue growth—and by Q4 2025, it will have a much easier comparison base to start posting positive growth, which is likely to continue into 2026.

That’s the setup. Now let’s turn to the bull case and how profitability is quietly improving.

Potential Upside Catalysts

Dominant Position in Game Engines: Unity remains one of the two primary players in the game engine space (along with Unreal), with a significant share in both mobile and PC/console markets. Unity’s dominance in mobile gaming (around 70%) and growing presence in the PC and console markets make it a core tool for game development.

Strong Asset Store: Unity's asset store provides a strategic advantage by offering a vast library of ready-to-use assets for game developers, streamlining development and adding a profitable revenue stream for Unity.

Increasing Adoption by AAA Studios: Large game studios are shifting from proprietary engines to third-party engines like Unity and Unreal, further solidifying Unity’s position in the gaming infrastructure space.

Underappreciated Core Asset: Unity’s game engine, a powerful and indispensable tool for developers, remains undervalued despite its potential to generate significant revenue in the future, particularly in the PC/console gaming market.

Expansion into Other Industries: Unity is well-positioned to capitalize on growth in emerging markets like VR/AR, robotics, industrial solutions (e.g., digital twins, factory automation), and smart devices, further expanding its addressable market.

Untapped Monetization Potential: While past efforts to monetize have been challenging, Unity’s core game engine has substantial pricing power and market position that could lead to improved monetization, similar to how Spotify turned its business around.

Undervalued Stock: Despite recent rallies, Unity’s stock is seen as undervalued with multiple paths to significant upside, primarily driven by its strong game engine business and potential growth in other sectors like ads and industrial solutions.

In short, Unity’s core graphics engine is a highly valuable asset with significant upside potential, and its dominant position in the game development market positions it for growth in the coming years. The stock remains undervalued, with multiple catalysts for future growth.

Stock Price Forecast:

Here are the target price forecasts for the next 12 months from analysts.

Based on 13 Wall Street analysts offering 12 month price targets for Unity Software in the last 3 months. The average price target is $26.05 with a high forecast of $31.50 and a low forecast of $15.00. The average price target represents a -9.96% change from the last price of $28.93.

Resource:

https://seekingalpha.com/article/4800466-unity-software-in-defense-of-the-graphics-engine

https://seekingalpha.com/article/4800082-unity-software-an-inflection-that-most-are-missing-why-im-long

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