Unity Software Is Downgraded by Oppenheimer on Valuation

Unity Software  (U) – Get Report, a video game software maker, received a downgrade to perform from outperform from Oppenheimer analyst Andrew Uerkwitz based on valuation.

He withdrew his share-price target of $113. Since going public Sept. 17 at $52, the stock has almost tripled. It recently traded at $148.77, up 0.78%.

Uerkwitz said he still likes the company’s prospects for the short term and the long term. But he “can’t stretch any further on valuation,” he wrote in a commentary cited by Bloomberg. “The stock has run up too soon, too fast for our risk appetite.”

Unity Software’s price-sales ratio stands at 56.32, according to Morningstar. Its stock has outgained other software-as-a service companies since its IPO, Uerkwitz noted.

While the company’s market capitalization ($40.3 billion) passed stalwart video game publisher Electronic Arts  (EA) – Get Report last week, he doesn’t see Unity matching EA on free cash flow until 2031, Barron’s reported.

Unity’s share-price surge stems from a “thirst for the next generation of gaming,” Uerkwitz said. Unity offers investors access to social gaming, live streaming and the “metaverse,” he said.

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