.September 3, 2024 3:37 PM

Morgan Stanley analysts upgraded Unity Software (NYSE:U) to Overweight from Equalweight, with a new price target of $22 on the stock. The upgrade follows a challenging year for Unity, with shares underperforming the S&P 500 by around 80% due to various issues.

Despite setbacks, Unity’s game engine maintains a dominant 70% market share in the mobile sector, showcasing a strong competitive advantage. Competitors have struggled to gain market share from Unity, highlighting the company’s strategic position in the industry.

While Unity’s Grow ad business faces increased competition, Morgan Stanley believes that growth expectations for Unity’s ad network are now realistic. Projections show a 6% growth for 2024-2026, assuming some market share loss in a broader ad market expected to grow at 11%.