Why Is Unity (U) Stock Rocketing Higher Today

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Petr Huřťák 2023/05/11 9:31 am EDT

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What Happened:

Shares of game engine maker Unity (NYSE:U) jumped 11% in the after-market session after the company reported a "beat and raise" quarter. First quarter results exceeded analysts' revenue, adjusted EBITDA, and earnings per share estimates. However, the company continued to burn cash, and gross margin deteriorated. Revenue guidance for the next quarter came in above Consensus, and the full year guidance was lifted. Adjusted EBITDA guidance also exceeded estimates for the next quarter and the full year. Management added more color to the guidance, noting that "for the balance of 2023, we expect revenue to grow faster than the markets in which we compete, with steady and meaningful continued progress on profitability." This is bullish as it signals market share gains while also achieving operating leverage on expenses. Also the strong guidance should give investors additional reason to be optimistic.

What is the market telling us:

Unity's shares are very volatile and over the last year have had 95 moves greater than 5%. But moves this big are very rare even for Unity and that is indicating to us that this news had a significant impact on the market's perception of the business.

Unity is up 14.7% since the beginning of the year, but at $30.45 per share it is still trading 47.9% below its 52-week high of $58.47 from August 2022. Investors who bought $1,000 worth of Unity's shares at the IPO in September 2020 would now be looking at an investment worth $451.65.

Is now the time to buy Unity? Access our full analysis of the earnings results here, it's free.