Mobile software company AppLovin (NASDAQ:APP) could make another bid for Unity Software (NYSE:U), according to analysts from Citi. AppLovin had offered to buy Unity in August last year but withdrew the bid as it decided that the company was better off as an “independent market leader.”
Unity has seen a leadership shake-up after the exit of its President, CEO, and Chairman John Riccitiello. Shares of the company have been on a downslide after announcing a controversial new price hike plan. Following a backlash from customers, the company apologized and backtracked on some parts of the plan.
Meanwhile, Citi expects AppLovin to revisit the deal where the company is likely to opt for a “mix of cash and stock given the pro forma firm’s lean balance sheet and premium multiple that Unity still commands over AppLovin.”
Citi stated that if such an offer does take place, shares of AppLovin could rally further. Year-to-date, AppLovin has already soared by more than 250%. Elaborating on it further, Citi commented that earlier, there were concerns about the company’s competitive positioning if there was a merger between Unity and IronSource. Citi added, “Given AppLovin’s recent performance, those risks are, perhaps, less valid this time around.”
What is the Target Price for Unity?
Turning to Wall Street, Unity has a Moderate Buy consensus rating, based on 12 Buys, eight Holds, and one Sell assigned in the last three months. At $46.30, the average Unity price target implies 54.2% upside potential.
