Unity Software Surges 15% Amid Analyst Optimism—What’s Driving the Rally?

• Unity (U) soars 14.99% to $34.14, hitting a 52-week high of $34.17
• Jefferies upgrades price target to $35, citing Vector’s ROAS improvements and 2025 ad spend growth
• Trading volume spikes to 31.45M shares, with turnover rate at 9.9%

The stock’s explosive move reflects renewed investor confidence after Jefferies’ bullish revision, pushing Unity above its 30-day moving average of $25.57. The rally extends a 25% month-to-date gain, defying broader sector softness.

Jefferies’ Bullish Upgrade Ignites Unity’s Rally
Unity’s surge stems directly from Jefferies’ upgraded price target to $35, paired with positive sentiment around its Vector ad-tech platform. Analyst Brent Thill highlighted a 10%-20% ROAS lift in Q2—a 50% improvement over Q1—and noted growing 2025 ad spend intent among clients. The upgrade also reflects revised 2025 Grow segment growth projections (2% YoY vs. prior -1%) and EBITDA estimates hiked by 11% for 2025. This catalyst underscores investor optimism in Unity’s ability to monetize its Create engine’s 50% adoption rate and Grow segment’s recovery.

Application Software Sector Mixed as Unity Outshines Peers
While Unity surges, the broader Application Software sector faces headwinds. Microsoft (MSFT), the sector leader, dipped 0.03% to $327.15 despite its cloud dominance, highlighting diverging trends. Unity’s outperformance reflects its niche ad-tech growth narrative, contrasting with broader enterprise software stagnation. The stock’s 45x P/S ratio remains contentious, but its Vector-driven revenue visibility distinguishes it from peers lacking such catalysts.

Bulls Target $35—Top Calls and Puts to Watch
• MACD: 1.57 vs. signal line 1.14 (bullish crossover)
• RSI: 82.43 (overbought, watch for pullback)
• Bollinger Bands: $34.17 above upper band ($30.93) signals aggressive buying

Bulls aim to test $35—Jefferies’ target—and the $34.50-$35 zone faces resistance from 200-day moving average ($22.55). Aggressive traders may consider:

1. U20250725C32 Call (Strike $32): Volume 1,267 • IV 72.5% • Delta 0.75 • Gamma 0.077 • Theta -0.168
—A high-delta call offering 302.6% leverage. Its $0.17 theta decay and proximity to current price make it ideal for near-term $35 rallies.

2. U20250725P34 Put (Strike $34): Volume 103 • IV 78.7% • Delta -0.43 • Gamma 0.088 • Theta -0.014
—A speculative hedge against overbought pullbacks. Its steep gamma amplifies gains if Unity slips below $33.50.

Trade Hook: Bulls push for $35—own the $32 call. Bears wait for $33 retracement to engage the $34 put.

Backtest Unity Stock Performance
The backtest of a 15% intraday surge in the U.S. stock market showed no impact on the entire market, with the maximum return being 0.59% on a single day. This suggests that such a surge did not lead to significant broader market gains.

Unity’s Momentum Faces Key Resistance—Bulls Eye $35
Unity’s surge tests critical resistance at $35—Jefferies’ target and the upper Bollinger Band—while Microsoft’s flat performance underscores sector fragmentation. Investors must watch Vector’s Q3 adoption rates and whether free cash flow can sustain its 45x P/S premium. With options activity spiking, traders should monitor $32.50 support (July 25 call’s strike) and $35 resistance. Final Take: Bulls hold for $35; bears short if $32.50 breaks—catalyst timing hinges on ad spend execution.