Morgan Stanley upgrades Unity Software (U.US) to "Overweight" on the competitiveness of its gaming engine
1min read Morgan Stanley recently raised its rating on Unity Software (U.US), showing confidence in its game engine business and competitive edge. Analyst Matthew Cost raised Unity Software's rating from "Hold" to "Overweight" while maintaining the target price of $22 and the bull case target price of $45. The stock rose over 2% to close at $16.7 on Tuesday.
Analyst Cost of Morgan Stanley noted in a client report that the market's general expectation of only 6% growth for Unity Software from 2024 to 2027 has led to a corresponding reduction in any future growth expectations. Despite this, Cost believes that the risk of Unity Software's forward projections is relatively low following the downward revision of its second-quarter earnings guidance.
Cost further emphasized that despite the challenges Unity Software faces in its customer relationships, its game engine still maintains a 70% market share in the mobile market. He argued that this proves the company's competitive advantage, or "moat," is very strong because competitors cannot gain market share by sacrificing Unity Software. Based on these analyses, Cost raised Unity Software's rating to "Overweight" and maintained the target price of $22 and the bull case target price of $45.
Despite Morgan Stanley's positive assessment, analysts' overall attitude towards Unity Software remains cautious. Seeking Alpha's author recommends "Hold" on the company's stock, while Wall Street analysts generally hold a "Hold" rating. Meanwhile, Seeking Alpha's quantitative system (historically outperforming the market) gave a "Sell" rating. This suggests that while Unity Software is recognized in some aspects, the market's view on its future development remains divided.