Investing.com -- HSBC upgraded Unity Software (ETR:SOWGn) to Buy from Hold given a stronger-than-expected fourth-quarter results and growing momentum in its game engine business. The firm raised its price target to $34 from $20.70, which implies a 21% upside.
“Unity engine (is) showing growing momentum and rollout of new ad model is a potential gamechanger,” analyst at HSBC said.
Unity’s Q4 revenue of $457 million fell 25% year-over-year but beat estimates, driven by a 9% rise in its strategic Create segment. HSBC noted that Unity’s efforts to repair relationships with game publishers and expand into non-gaming sectors are showing results.
The company also launched a new AI-powered mobile ad model, Vector, which HSBC sees as a potential long-term challenger to AppLovin (NASDAQ:APP). However, the transition may cause short-term disruptions.
HSBC expects further revenue growth and a narrowing GAAP loss per share, citing Unity’s strong market position and M&A attractiveness.
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