What Happened?

Shares of game engine maker Unity (NYSE: U) jumped 13% in the afternoon session after Jefferies upgraded the stock from Hold to Buy and raised the price target from $22 to $29. This positive revision was driven by the firm's belief that Unity's improved Vector ad model will be a key catalyst, fueling accelerating revenue growth in fiscal year 2026 and beyond.

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What The Market Is Telling Us

Unity’s shares are extremely volatile and have had 51 moves greater than 5% over the last year. But moves this big are rare even for Unity and indicate this news significantly impacted the market’s perception of the business.

The biggest move we wrote about over the last year was 3 months ago when the stock gained 25.3% on the news that the company reported impressive fourth-quarter 2024 earnings, which blew past analysts' revenue, EPS, and EBITDA expectations. However, revenue declined 25% year-on-year due to a portfolio reset (to focus on its core operations), with Create Solutions revenue plunging 47% and Grow Solutions revenue slipping 5%. 

Looking ahead, its revenue and EBITDA guidance for the next quarter fell well short of Wall Street's estimates. Still, this was a decent quarter, masked by the short-term impact of some business updates, including the new pricing model announced in 2024.

Unity is up 5.7% since the beginning of the year, and at $25.91 per share, it is trading close to its 52-week high of $28.34 from February 2025. Investors who bought $1,000 worth of Unity’s shares at the IPO in September 2020 would now be looking at an investment worth $379.08.

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