Unity Software Declines 6% on Quarterly Loss

Shares of Unity Software Inc. (U) lost 6.2% in Tuesday’s extended trade after the software company reported a Q3 loss of $0.06 per share against the consensus estimate of a loss of $0.07 per share. The figure compares favorably with a loss of $0.09 per share in the same quarter last year.

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Total revenues generated during the quarter rose 43% year-over-year to $286.3 million, beating the consensus estimate of $264.2 million. (See Unity Software stock chart on TipRanks)

Create solutions and operate solutions revenue increased 34% and 54%, respectively, from the same quarter last year. Also, strategic partnerships and other revenue stood at $17.6 million, down 3%.

The Chief Financial Officer of Unity Software, Luis Visoso, said, “We delivered another strong quarter in Q3 2021 with $286 million in revenue, continuing to add new customers and expanding our business within existing customers… Bringing Weta Digital into the Unity family will materially advance our relevance with artists, and increase our addressable market, setting us up well for our long-term growth prospects.”

Outlook

The company has raised its guidance for the full-year 2021. Unity Software projects total revenues between $1,080 million and $1,085 million against the consensus estimate of $1,100 million. Meanwhile, its non-GAAP loss from operations is expected to be between $59 million and $64 million.

For the fourth quarter, the company expects to post revenues in the range of $285 to $290 million. Also, it anticipates a loss from operations in the range of $20 million to 25 million.

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Weta Digital Acquisition

Meanwhile, Unity Software has entered into a definitive agreement to acquire Weta Digital’s tools, pipeline, technology, and engineering talent. As per the terms of the deal, Unity will acquire Weta Digital for $1.625 billion in a combination of cash and stock.

With this acquisition, Weta’s visual effects (VFX) tools will be accessible to millions of creators and artists around the world. Also, post integration onto the Unity platform, it will enable the next generation of RT3D creativity and shape the future of the metaverse.

Analysts Recommendation

Based on 10 Buys and 3 Holds, the stock has a Strong Buy consensus rating. The average Unity Software price target of $152.82 implies 11% downside potential from current levels.

Increased Hedge Fund Activity

TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Unity Software is currently Very Positive, as the cumulative change in holdings across all 7 hedge funds that were active in the last quarter was an increase of 1.7 million shares.