New game-engine fees ‘unlocking engine for growth’ at Unity, as analyst upgrades stock to a buy

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Unity Software Inc. gained an analyst upgrade on Friday on the belief the company’s new game-developer fees will turn its game engine into a growth engine.

On Friday, B. of A. analyst Michael Funk upgraded Unity

to a buy from neutral, and hiked his price target to $56 from $46, because his analysis of the company’s new fee structure “implies improved monetization of the company’s industry leading mobile game creation engine,” which in turn, unlocks Unity’s “engine for growth.”

Unity shares closed up 1.7% at $36.32, for a 3.6% decline on the week, while the broader market sold off with the S&P 500 index
falling 1.2% Friday, for a weekly loss of 0.2%.

Of the 28 analysts who cover Unity, 19 have buy-grade ratings, seven have hold ratings, and two have sell ratings, along with an average price target of $47.15, according to FactSet data.

On Wednesday, Unity met with blowback after it announced in a Tuesday blog post it would charge more established game developers every time their game was downloaded.

One analyst considered it a “PR disaster,” but saw the upside in the new fees, while shares fell 5.5% Wednesday, and another 3% on Thursday.

Funk said he believes mobile ad spending has stabilized and that “known risks and execution issues are more than priced into the stock.”


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