Unity Software (U) Stock News and Forecast: Shares add nearly 10% as Q2 guidance raised by $12 million

Unity Software (U) is beginning to grow into the good graces of Mr. Market after shedding more than 85% since its pandemic heights. The first quarter earnings call late Wednesday showcased a video game platform that has not quit growing. In fact, Unity’s management said revenue growth next quarter would likely top 72% YoY.

This helped Unity Software stock climb 9.4% to $31.44 in Thursday’s premarket, while NASDAQ 100 futures are up just 0.2%.

Unity Software stock news: Growth not giving up

Unity reported $0.06 in adjusted EPS and $-0.67 in GAAP EPS for the first quarter. The former figure beat Wall Street consensus by 9 cents, and the latter beat by 3 cents. This is the second quarter in a row that adjusted earnings were positive after suffering through years worth of negative quarters.

Revenue of $500.4 million rose 56% YoY and overpowered the average analyst estimate by $20.5 million.

“It was a strong first quarter,” said Chief Financial Officer Luis Visoso on the earnings call.  “We beat the high end of the revenue guide by $20 million. We beat the high end of the EBITDA guide by $20 million as well. And if you compare this to the first quarter of 2022, that’s a $55 million EBITDA improvement.”

Adjusted EBITDA of $32 million in the first quarter easily beat the consensus call of $9.5 million and last year’s $-23 million figure.

CEO John Riccitiello said Unity’s developer platform would continue to grow faster than its industry as developers embrace the end-to-end possibilities. For the second quarter, he raised revenue guidance to a midpoint of $515 million, above consensus near $503 million. This would mean YoY revenue growth between 72% and 75%. 

The second quarter would also add to Unity’s drift toward profitability as guidance for adjusted EBITDA was pushed up from $50 million to $60 million. This would be helped by last week’s announcement of another 600 job cuts. Between June 2022 and January of this year, Unity had already cut 500 jobs, so it is plain to see that the strategy of focusing on profits is now front and center for Unity’s management.

Unity stock forecast

Seeing as how Unity stock is trading above $31 part of the time in Thursday’s premarket, bulls might try to push it to the $32.50 resistance level from March 31 through April 4. A break there would allow strong buying to push the price action in Unity stock up to the $35 to $36 window. This region worked as both resistance and support back in the period between November of last year through this February. It was also the important site of the gap down on February 23, and we all know how much markets love to fill chart gaps. True resistance in both December and again in February came from the $41 to $43 supply zone.

Up until now, Unity stock has been in a slight downtrend, so the question is how long bulls will hold before taking profits. A necessary sign will be when the 9-day moving average overtakes its 21-day counterpart.

Unity Software daily chart