Shares of Unity Software Inc. (NASDAQ:U) are trading higher Tuesday after Oppenheimer & Co. analysts upgraded the stock to an outperform and assigned a $36 price target.
Unity Will Be Insulated From “World Models”
Oppenheimer analyst Martin Yang said the fear that models like Google's Project Genie will displace game engines is “fundamentally misplaced” and ignores the distinct architectural role Unity plays in development.
The firm believes that Unity will be a primary platform for AI deployment, and that the company will benefit from integrating AI into its game development platforms, contrary to fears that AI could render such technologies obsolete.
AI As A Catalyst, Not A Threat
More specifically, Yang said Unity is leveraging AI to enhance its capabilities, particularly through its engine where AI coding assistants are lowering barriers to entry and boosting productivity. This integration is anticipated to accelerate content creation, benefiting Unity’s “Grow” segment extensively.
Moreover, the recent introduction of the Waymo World Model, built on Genie 3, exemplifies how AI is being used more as a complementary technology rather than a replacement. This aligns with Unity’s strategy to harness AI to fortify its platform’s core functionalities, the analyst said.
Unity’s Healthy Balance Sheet Stands Out
The analyst pointed out that Unity’s financial health appears robust with an expected adjusted EBITDA margin expansion to 26% by 2026, up from 22% in 2025.
The company’s focus on refining its product offerings and maintaining cost discipline is projected to bolster its financial metrics significantly. Furthermore, Unity's valuation suggests substantial upside, with a price target set at $38, implying a 24x multiple on projected 2027 adjusted EBITDA.
The strategic shift towards high-margin cross-platform commerce solutions could provide additional financial uplift, indicating potential for even greater returns than currently forecasted.
Stock Trading Below Moving Averages
The stock is currently trading 21.1% below its 20-day simple moving average (SMA) and 28.5% below its 100-day SMA, indicating a challenging short-term outlook despite the recent gains. Over the past 12 months, shares have increased by 42.13% and are currently positioned closer to their 52-week highs than lows, suggesting a relatively strong long-term performance.
The RSI is at 31.06, which is considered neutral territory, while the MACD is below its signal line, indicating bearish pressure on the stock. This combination suggests that while the stock is experiencing some upward movement, underlying momentum remains cautious.
The combination of neutral RSI and bearish MACD indicates mixed momentum, suggesting traders should remain vigilant.
Analyst Consensus & Recent Actions: The stock carries a Buy Rating with an average price target of $41.45. Recent analyst moves include:
- Oppenheimer: Upgraded to Outperform (Target $38.00) (Feb. 10)
- Freedom Capital Markets: Initiated with Buy (Target $52.00) (Jan. 16)
- Goldman Sachs: Neutral (Raises Target to $47.00) (Jan. 13)
U Stock Pushes Higher Tuesday
U Price Action: Unity Software shares were up 4.94% at $28.89 at the time of publication on Tuesday, according to Benzinga Pro data.
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