Unity Software 2024 Projections & Analysis

U (Unity Software) 

Chart done on daily timeframe. Earlier this year, Apple announced that they will be partnering with Unity to “create immersive real-time 3D apps and simulations to Apple’s new spatial computing platform, Apple Vision Pro” (Unity. com). Partners of Apple have enjoyed exponential growth in the past so many investors are excited to see what’s in store for Unity in 2024. The software company was founded in 2004, but has struggled to maintain notable revenue growth until recent years when it finally topped 1B in annual revenue, but leadership hasn’t been able to move the needle in the right direction when it comes to profitability. As revenue has grown, profitability has moved further into the negative, and free cash flow isn’t positive, signaling possible trouble in capital management for the ambitious company. One thing to note is that it is not abnormal to see a tech company struggle to maintain profitability, especially in its early years and during high interest rate policy, so we shouldn’t count Unity out strictly based on the lack of profitability; however if you’re an investors, or looking to invest in 2024, the main thing to watch is how the leadership handles the additional revenue that comes with Apple’s Vision Pro launch. 

Unity could be on the verge of a breakout as Apple released its new flagship product, but that should be taken with a grain of salt. As of right now, its numbers are not impressive enough to say it is a safe hold so any position taken is considered high risk high reward. They don’t have a positive price to earnings ratio because they’re operating at a negative, but they are trading at about a 10x market cap from their current revenue, which is a positive signal. Revenue is only expected to move higher next year as their Apple partnership takes hold so we are leaning bullish on the stock. 

Please note that it is very common for Apple to “use” companies and eventually develop their only chip/software, leaving the companies they partner with vulnerable. This is always a risk when investing in a company that has one big contract instead of a range of contracts. If you invest in $U then you want to watch for their customer base to expand. If their leadership is smart, they’d use Apple’s partnership as a way to gain more customers. 

Technical analysis:

$U’s chart recently fell below a key support on earnings and recovered very quickly, so that drop could’ve been a liquidity grab before a rally. Its key supports are 24.25 and 21.22 (all time low). If you need a stop loss on entry, you can use either of those points. Price target above 32.80 is 38.00-40.00 to start.