What Happened?
Shares of game engine maker Unity (NYSE: U) jumped 12.4% in the morning session after Jefferies analyst Brent Thill raised his price target on the company to a Street-high of $35. The new price target represents a nearly 18% upside from the stock's previous close and a 20.69% increase from Jefferies' prior target of $29. The firm maintained its "Buy" rating, citing improving sentiment around Unity's ad-targeting model, Vector. Thill noted that positive mentions for Vector increased in the second quarter and that its Return on Ad Spend (ROAS) for clients improved to a 10%-20% lift, up from 5%-7% in the prior quarter. Driven by the expected improvements, Jefferies raised its revenue forecasts for Unity for 2025 and 2026. The analyst also highlighted that usage for the new Unity 6 engine is growing, indicating stability in the company's Create segment.
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What Is The Market Telling Us
Unity’s shares are extremely volatile and have had 54 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 previous big move we wrote about was 2 days ago when the stock gained 3.9% on the news that a regulatory filing revealed a new, multi-million dollar investment from Stephens Investment Management Group. According to a filing with the Securities and Exchange Commission, Stephens Investment Management Group purchased 825,669 shares of Unity during the first quarter, a stake valued at roughly $16.2 million. This new position gives the investment firm approximately 0.20% ownership of the game development platform company. Large investments by institutional investors are often viewed positively by the market, as they can signal a strong belief in a company's long-term strategy and growth potential. The filing also noted that several other hedge funds and institutional investors have recently increased their holdings in Unity, suggesting a broader accumulation of the stock by professional money managers.
Unity is up 33.3% since the beginning of the year, and at $32.68 per share, has set a new 52-week high. Investors who bought $1,000 worth of Unity’s shares at the IPO in September 2020 would now be looking at an investment worth $478.13.
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