Kaushik's avatar
$21m follower assets
$U Benchmark

"We are initiating coverage of Unity with a Sell rating and $27 PT. Unity's a global platform for creating and monetizing interactive RT3D content that enables game creation, mobile game advertising, and the metaverse. We suspect sustained economic malaise, post-pandemic normalization on player engagement and user acquisition, and rationalized spend scenarios could be a challenging environment for Unity's growth profile. We believe the metaverse hype punctuated the peak of a momentum market that has now expired, and we think speculative interest in the secular trade will continue to fade as market conditions shift investor interest elsewhere. Unity was a pandemic darling that has now entered a less optimal operating scenario."
Jensen Butler's avatar
Welp. Let a 100% gain turn into a loss and bag holding still 🥲
Joey Hirendernath's avatar
@investor_from_nepal might find this interesting.
Joshua Simka's avatar
Apart from being rather shortsighted in terms of time horizon, this doesn't take into account anything about $U's optionality beyond gaming

From Unity's Q1-22 earnings call last month (bold emphasis mine)

This quarter we closed 34 deals above $100,000, up 126% year over year and up 13% quarter over quarter. Unity is being used in construction, commerce manufacturing, advanced simulation and much more.

We are seeing broad-based adoption of these tools from companies like Mercedes-Benz. Unity is partnering with Mercedes to power the infotainment domain of a new operating system called MB.OS. MB.OS is a fully comprehensive architecture covering electric and electronic hardware, as well as software, which will hit the road in 2024. It can be seen in the VISION EQXX prototype vehicle.

As part of our partnership, we're also upgrading the Hey Mercedes personal assistant's intelligence and interactivity into a 3D Star Avatar that will be more akin to a digital butler. Additionally, the MB.OS system will allow for 3D navigation that can zoom from satellite view down to 10 meters. It will also account for what time of day it is, ensuring an accurate real-time 3D display. Also, in March, we announced how Zutari is changing the way that large-scale solar projects in South Africa are designed, created and operated.

Zutari is using Unity's real-time 3D development platform to automate large-scale solar photovoltaic projects to reduce the time required to develop design level insights and decrease costs. Not only does Zutari complete sun tracking and shading for each solar panel, but they also optimize solar sites to optimize the number and position of the panels installed in order to increase energy output, all within Unity. Zutari is also using Unity to explore additional sustainable energy facilities. During Q1, we also achieved customer wins with our Digital Twins solutions across several new categories.

From one of the largest energy companies in the world that is deploying our Digital Twins products across the enterprise to run their own downstream operations more effectively, to an iconic luxury brand that is leveraging Unity to bring to market a differentiated digital experience that can only be done in real-time 3D. Lockheed Martin is a model example of land and expand in action. Our first project with them started in 2017 when they bought a few seats for design visualization. Within 12 months, they had deployed 132 licenses to develop more interactive experiences for product development.

Five years later Lockheed has nearly 500 licenses across nine business units for multiple use cases including simulation, training and guidance and collaboration. We are also making a difference in enabling how creators work. Parsec and SyncSketch are becoming critical tools in the hybrid work world. Creators need effortless access to high fidelity workspaces and the ability to collaborate regardless of their location.

The average time spent on Parsec per Teams' customer is more than 27 hours per week. This is what hybrid work looks like. Creators shift back and forth between direct access to powerful machines and remote to virtual access all without skipping a beat. The fact that we see incredible numbers and growth in such high sustained usage is a signal of the future that creative work requires.

As you can see, we are making good progress enabling creators across industries to adopt real-time 3D. I've never seen such a global surge in creative innovation in my career and we are honored to be powering much of it. We're seeing this innovation in gaming AR and VR and in many non-game verticals across thousands of projects that are created and launched on Unity every day. I want to reiterate my expectation that Unity will sustain and sustainably grow revenue at or above 30% per year over the long term even as we gain scale.
Investor from Nepal 🇳🇵's avatar
Hmm interesting.

I don't think "post-pandemic normalization on player engagement and user acquisition" really works for it. Their revenue from create is a subscription for developers, unless their big customer like Zynga cut their developer by significant amount, I don't see it impacting the create revenue.

With Operate - I think last Q report, despite having buggy pointer tool, they missed the expectation by thin margin.

Metaverse hype is all gone, yes but still Unity seems to be leader in interactive content creation. Sentiment seems to be agains $U but let's see how it does in future. I would say it's a buy with PT around $86 in short term and $315 by the end of 2031.

Would love to hear what @couch_investor has to say on it.
Neil's avatar
@investor_from_nepal Yeah while I agree that the metaverse hype is dead that doesn't change much for Unity which is much much more than just a fancy metaverse play. I mean, it has been growing before the term metaverse became a thing.

Last Q we had that bug with operate but create is doing fine.

Seems to me like like the analyst doesn't really know Unity
Leon's avatar
$U is one of the few pandemic highflyers i‘m invested in and i never thought about selling them despite a currently still not cheap valuation. But their optionality is so huge and they have not even started to really monetize their suite, so i‘m quite comfortable here to stay with my losses for some years and look how this plays out

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