Based in California, Unity Software (NYSE:U) owns a platform for creating and operating interactive, real-time 3D content. Thus, U stock could provide investors with exposure to the software-as-a-service (SaaS), gaming, and augmented reality/metaverse niche markets.
The target clientele for Unity isn’t the gamers themselves. Rather, it’s the content creators, including game developers and architects, automotive designers, filmmakers and more.
With Unity’s software, they can create, run and monetize 2D and 3D content for a variety of platforms. These include mobile phones, tablets, PCs, consoles, and augmented/virtual reality devices.
Not long ago, the company significantly enhanced its tech tools and talent through acquisitions. Moreover, as we’ll see, Unity Software’s financial stats should put any lingering concerns or skepticism to rest.
A Closer Look at U Stock
Let’s backtrack a bit. After establishing a price range between $44 and $48 per share for its initial public offering (IPO), Unity Software settled on an IPO price of $52.
The shares started trading publicly on the New York Stock Exchange on Sept. 18, 2020. There was a quick burst of investor enthusiasm, as U stock flew from $73 in September to $173 in December of 2020.
The shareholders then coughed up most of their gains during the first half of 2021. Then another rally ensued, with the Unity Software share price soaring to $210 in November.
This stock has taken its investors on a virtual roller-coaster ride, and it seems like there’s no end to it. After peaking at $210, U stock tumbled to $140 by Dec. 14.
It’s difficult to apply support and resistance levels to this stock. At least, we can say that it recently pulled back, so this could be a good time to start a small position.
Strong Momentum
Interestingly, Unity Software had already been in existence for quite a while, prior to its IPO. The company was founded in 2004 under the name Over the Edge Entertainment before changing to its current name in 2007.
As InvestorPlace contributor Tom Taulli observed, Unity’s platform has two main parts. One part is Create Solutions, which is the content-development environment. The other part is Operate Solutions, through which Unity’s customers can grow and engage their user bases, improve the monetization of their content and optimize their user acquisition.
It’s been a highly successful business model, and there’s data to prove this. During the third-quarter of 2021, Unity Software generated $286.3 million in revenues. That represents a 43% increase compared to the same period in 2020.
The Operate Solutions segment showed particularly strong momentum, with a 54% year-over-year revenue increase to $185 million.
Not only that, but Unity Software is growing its base of big-ticket customers. As of Sept. 30, 2021, 973 customers each generated more than $100,000 of revenue in the trailing 12 months, compared to 739 customers as of Sept. 30, 2020.
Diamonds of All Diamonds
In order to better serve its clients, Unity Software recently acquired the tools, pipeline, technology and engineering talent of a highly influential visual effects company.
That company is Weta Digital, and it was founded by celebrated film director Peter Jackson. Weta Digital is best known for its work on the Lord of the Rings films.
In a deal worth $1.625 billion, Unity will get dozens of tech tools, a data platform for interoperable 3D art creation and access to Weta Digital’s 275 engineers.
Marc Whitten, senior vice president and general manager, Create Solutions at Unity, explained how the content-creator community stands to benefit from this high-dollar deal.
“By bringing this team and technology to Unity, we can enable more storytellers to reach their creative potential by giving them access to the diamonds of all diamonds of VFX [visual effects] tools, underpinned by the power of real-time 3D,” Whitten clarified.
The Bottom Line
There’s simply no denying that Unity Software is capable of growing its revenues along with its client base. Furthermore, the acquisition of Weta Digital’s tech tools and talent only enhances Unity’s value proposition.
So, if you can handle the roller-coaster ride, feel free to take on a small position in U stock today.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
