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Unity: mediocre report, strong forecast

Unity: mediocre report, strong forecast

16 November 2022

A video game developer from the United States, Unity, reported on the results of the third quarter of 2022. The data came out mixed: the figures in some places were weaker than forecasts, in some places they coincided with the consensus.

  • revenue +13% YoY to $323 million, within expectations;
  • margin -13% yoy;
  • loss on adjusted EBITDA of $42 million, above forecasts;
  • FCF loss of $86 million, worse than expected.

The weak point of the company was the advertising sector. The general slowdown in the global advertising market has led to a drop in revenue from this direction, as well as from advertising monetization in games. There are no figures, but, according to management, the growth of advertising in the third quarter was within single digits, although in the second quarter it grew by 10% yoy.

This is a global trend where advertisers around the world are cutting budgets. The trend is likely to spread to the fourth quarter.

The company tried to mitigate the heterogeneous figures and presented an interesting forecast for the last quarter of 2022. Thus, revenue expectations for the fourth quarter suggest a range of $425-445 million, operating profit of $5-15 million. In the fourth quarter, FCF may increase.

We can definitely say that the revival of the advertising market could give the company’s financial indicators a greater momentum. However, this is not expected before the second quarter of next year.

The consensus forecast for Unity shares is $50-52 in the future of the year.

The MACD indicator on the daily trading chart of Unity securities is growing in the negative zone and signals a purchase. The Stochastic oscillator stays in the overbought area, but leaves a buy signal in force.

16 November 2022
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