Unity Stock: Buy or Sell? | U Stock Analysis
Summary
Parkev analyzes Unity Software's recent turnaround, noting that management is finally confident in the company's structure after two years of balancing the business and struggling with its advertising segment. Parkev highlights the success of the Unity Vector segment, which achieved 23% quarter-over-quarter growth and reached a $1 billion annual revenue run rate. Despite these operational wins and a revenue increase from $500 million in 2020 to $2 billion recently, Parkev points out that operating margins and returns on invested capital remain negative, though they are improving.
Mentioned Stocks
Reasoning: Parkev downgrades Unity Software to a hold because the share price has increased to nearly $50, which is significantly higher than Parkev's calculated intrinsic value of $26.75. Parkev explains that while the business is improving with a $1 billion revenue run rate for Unity Vector, the stock price has outpaced these improvements by anticipating future growth that hasn't happened yet. Parkev mentions that a forward price-to-earnings ratio of 27.5 is reasonable, but the current market price makes the situation riskier for new investors.