Unity Software price forecast after recent appreciation

Unity Software Inc. (NYSE: U) shares advanced more than 10% last week, and the company reported strong fourth-quarter results on Friday.

Growing its customer base

Unity Software is the company that 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.

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The company reported better than expected fourth-quarter results this Friday; total revenue has increased by 43.4% Y/Y to $315.86 million, $20.15 million above expectations, while the non-GAAP earnings per share were -$0.05 (beats by $0.02).

Non-GAAP operating margin was minus 3.8% in the fourth quarter, expanding 530 basis points from a year earlier, and the management remains committed to continuing to improve operating margins as Unity Software continues to gain scale.

The company’s management remains very optimistic about the next quarter in terms of growth, and it expects revenue between $315 million and $320 million which represents revenue growth of more than 30% compared to the first quarter of 2021.

Unity Software ended a fiscal 2021 year with 1052 customers, up from 793 a year before. John Riccitiello, CEO of Unity Software, added:

We have built our business on a strong foundation based on very healthy customer metrics and structural economics. We enter 2022 with momentum across both Create and Operate, which gives us confidence in our outlook.

John Riccitiello said that the transitions from 2D to 3D create a massive growth opportunity for many decades to come. This opens opportunities for gaming, e-commerce, automotive, architecture, media, and entertainment, and Unity is very well positioned to capitalize on these trends.

For the full 2022 fiscal year, the company’s management expects revenue between $1.48 billion and $1.5 billion, while the non-GAAP loss from operations should be around $40 million.

Unity Software is expanding its market share, but with a $31 billion market capitalization, shares of this company are not cheap. Unity Software is still not profitable, the book value per share is $8, and there are better investment opportunities at the moment.

$120 represents strong resistance

Unity Software’s stock price has fallen more than 50% after reaching the highest level in 2021 of $210 on November 18.

The current support level stands at $100, and if the price falls below this level, it would be a strong “sell” signal.

On the other side, if the price jumps above $120 resistance, it would signal trading shares, and the next target could be at $130 or even above.

Summary

Unity Software reported better than expected fourth-quarter results this Friday, and the company’s management raised guidance for the 2022 fiscal year. Unity Software is expanding its market share, but with a $31 billion market capitalization, shares of this company are not cheap.

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