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Investing.com - Wells Fargo (NYSE:WFC) raised its price target on Unity Software (NYSE:U) to $29.00 from $24.00 on Thursday, while maintaining an Equal Weight rating on the stock. Unity, currently trading at $31.92 with a market capitalization of $13.27 billion, has demonstrated remarkable momentum with a 129% return over the past year. According to InvestingPro analysis, the stock appears slightly overvalued at current levels.
The firm cited Unity’s second-quarter revenue guidance of $440-450 million, which brackets the consensus estimate of $448 million but falls slightly below buy-side expectations of $455 million at the high end. Wells Fargo noted that Unity’s revenue has outperformed the high end of guidance by 4 percentage points on average over the last four quarters. The company maintains strong financial health with a healthy current ratio of 2.74 and impressive gross margins of 74.83%.
Management expects a slight sequential decline in Create revenue, driven by a $12 million one-time contract benefit from the second quarter rolling off, while Grow revenue is projected to increase mid-single digits quarter-over-quarter. The Unity Ad Network is expected to grow at least 10% sequentially, compared to non-Unity Ad Network revenue remaining flat. Want deeper insights? InvestingPro subscribers have access to 12 additional key tips and comprehensive financial metrics for Unity Software, along with detailed Pro Research Reports.
Wells Fargo’s fiscal year 2025 estimates remain largely unchanged, while fiscal year 2026 revenue and EBITDA forecasts increased by 1% and 5% respectively, primarily due to higher expectations for Grow and Unity Ad Network performance.
The new $29 price target implies 9.0x 2027 estimated Create revenue of $703 million and 16.0x 2027 estimated Grow EBITDA of $450 million.
In other recent news, Unity Software reported impressive financial results for the second quarter of 2025, surpassing analyst forecasts with earnings per share (EPS) of $0.18, which was 38.46% higher than the anticipated $0.13. Revenue for the quarter reached $441 million, exceeding expectations by $14.2 million. JMP Securities responded by raising its price target for Unity Software to $35 from $30, maintaining a Market Outperform rating. Needham also increased its price target to $40 from $30, citing Unity’s better-than-expected performance and strategic positioning in the mobile gaming ecosystem. Jefferies mirrored this sentiment, raising its price target to $40 due to the momentum in Unity’s Vector platform, with Unity Ads showing a 15% quarter-over-quarter growth. Oppenheimer maintained a Perform rating, noting mixed results from the Vector platform but acknowledging the 15% growth in Unity’s Ad Network. These developments highlight the positive reception from analysts following Unity’s strong quarterly performance.
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