.August 7, 2024 04:26:00 PM

Jefferies analysts have lowered their price target for Unity Software Inc. (NYSE:U) from $24 to $16 per share due to expectations of a downward revision in Unity’s 2024 guidance. A recent survey of mobile ad tech revealed weakness in Unity’s Grow business, prompting concerns about the company’s financial outlook.

The analysts are cautious about another potential cut in fiscal 2024 guidance, with the Grow segment playing a significant role in the anticipated decline. They are eager to hear from Unity’s new CEO, Matt Bromberg, about his plans for the Create segment and strategies to improve the Grow segment through enhanced data targeting.

Unity’s stock is currently trading at a premium valuation of 14 times 2025 EBITDA, compared to competitor AppLovin at 10 times. This premium valuation, combined with the survey results, has led Jefferies to lower their price target. They believe Unity’s current guidance implies an unrealistic acceleration in the second half of the year.

While Jefferies finds Unity’s Q2 revenue guidance of a 6-7% decline reasonable, they anticipate a probable cut in the full-year 2024 guidance. The original forecast suggested a significant acceleration in the latter half of the year, which recent data does not support.