Unity Software (U) Gains on a Beat-and-Raise, Announces Takeover of Parsec for $320 Million, Analysts Positive and Raise PTs
Shares of Unity Software (NYSE: U) are trading about 2% higher in pre-open Wednesday after the company delivered an impressive beat-and-raise and raised guidance.
Unity posted a Q2 loss of $0.02 per share on sales of $273.6 million to top the analyst consensus of a loss of $0.11 per share on sales of $242.3 million. Unity previously guided for Q2 sales of $242.5 million, at the midpoint of guidance.
“At Unity, our goal is to provide creators with the best tools to succeed as RT3D creators. Unity is designed to enable creators to build anything digital and to instantly deploy their work across dozens of platform types and devices, which is to make participating in building the metaverse accessible to all creators,” said John Riccitiello, President and Chief Executive Officer, Unity.
The company also delivered a beat on the outlook as it projects for Q3 revenue to come between $260 million and $265 million to beat the consensus of $253.3 million. Full-year, the company is projecting revenue between $1.05 billion and $1.06 billion for the year, higher than the company’s prior forecast of $1 billion to $1.02 billion for the year and analyst consensus of $1.01 billion.
"While our strong performance is broad based, we are particularly proud of the performance from our Operate Solutions group that expanded market share in a tough environment. Our strong performance gives us confidence to raise guidance for the year, again,” commented Unity’s Luis Visoso, Chief Financial Officer.
Furthermore, the company reported it will acquire remote desktop and streaming technology company Parsec for roughly $320 million in cash.
“This transaction is an important step toward Parsec’s and Unity’s expanded cloud vision: that creators should expect to be able to work from any location, on any device through rich and powerful tools and seamless cloud infrastructure to deliver the real-time 3D experiences of the future,” Unity said in a press release.
Oppenheimer analyst Martin Yang raised the price target to $125.00 per share from $103.00 on the Outperform-rated stock after the company delivered better than expected 2Q results with “impressive operating momentum.
“The company appears to be a net beneficiary in recent mobile advertising market share shifts. It also saw substantial momentum with Unity Engine in non-gaming verticals. The newly announced acquisitions (Speedtree and Pixyz in 2Q, Parsec in 3Q) will likely continue to augment its ability to serve non-gaming vertical customers and develop alternative revenue models beside per seat subscriptions,” Yang said in a client note.
Stifel analyst Tom Roderick maintained a “Buy” rating and raised the PT to $135.00 per share from $125.00 on a “big beat.”
“If there was any controversy to find around Unity, it was most certainly the question of whether or not IDFA would create a genuine headwind for the company. The company had been resolute in saying the headwind would be manageable and contained at $30mn for the full year. Skeptics we spoke with throughout the quarter weren't so confident for Unity. The results are in - at least for now - as Unity posted a $32mn revenue beat for the quarter, with Operate accounting for the entirety of the beat, growing at 63% y/y off a tough compare. The controversy from here will be the forward guide, as it calls for a sequential revenue downtick in Q3, though we think traditional back to school seasonality and broader conservatism puts keeps this beat and raise story right on track,” Roderick wrote in a note to clients.
On the Parsec acquisition, the analyst adds:
“We believe this acquisition will help Unity as it expands its Create solution within gaming but also into other industry verticals that venture into Real-Time 3D designs and programming.”