Unity Software
‘s stock was way down Friday after the videogame developer chose not to offer a financial forecast, saying it is working through changes likely to lead to more job cuts and the discontinuation of some products.
The outlook is uncertain, analysts say, but many of those tracked by FactSet who cover the company still like the stock.
Unity (ticker: U), a renowned player in videogames, has seen tough days lately. The company announced a new pricing structure on Sept. 12, triggering a backlash from customers. Management backtracked on the plan on Sept. 22, apologizing for the move.
Unity has had three rounds of job cuts since mid-2022, with the last one in May.
On Thursday after the market closed, Unity delivered earnings of 32 cents for the third quarter, higher than the 17 cents predicted by analysts. Revenue of $544.2 million, though within the range management had forecast, fell below the $554.2 million expected.
Unity didn’t provide guidance for the fourth quarter or the full year 2023, saying in a letter to shareholders it is working on “operational interventions.” That will likely lead to further cuts in the workforce, a reduction in office space, and discontinuation of certain products, Unity said.
The stock fell 7.9% to $23.25 on Friday.
Needham’s Bernie Mcternan cut his target price on the stock to $40 from $50, citing the increased uncertainty and possible volatility in the coming quarters. He maintained a Buy call on the stock, noting management’s moves to redirect the company.
William Blair’s Dylan Becker reiterated his Outperform rating, which is equivalent to a Buy, in a research note Friday. “While we acknowledge the potential uncertainty tied to near-term business metrics, we believe the swiftness in action” by management will enable growth, Becker said.
William Blair doesn’t offer price targets on stocks it covers.
Nearly 55% of analysts recommend buying the stock, according to FactSet, while 39% suggest no action or rate it at Hold. Seven percent of analysts suggest selling.
Benchmark’s Mike Hickey is one of those with a Sell rating. The company “is in the throes of a drastic cost-cutting initiative” and is focused on a “desperate scramble to reorient,” he wrote Friday.
Hickey’s target for the stock price is $16.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com.
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