Unity Software Inc. (U) was cut to Underperform at Macquarie Equity Research on Monday, with the firm maintaining a $20 per share price target on the stock.
Analysts stated that staff cost cuts at the video game software development firm will not mask the disarray at the company.
There are three factors influencing Macquarie's concerns about the company. Firstly, they are worried about the scope of reorganization the company is currently undertaking, which includes key ironSource departures. This is because "the ad tech merger has underperformed."
Secondly, analysts wrote that they "expect a delay in game engine monetization until 2025 due to likely lower Unity seat licenses as game developers have laid off staff as well."
Macquarie also sees delayed revenue upside from price increases and runtime fees until after Unity 6 launches.
"Cost cuts announced by the company may be substantial, and the risk to our call is that these are enough to secure EBITDA targets," the analysts acknowledged.