Unity Software (NYSE:U) stock is making one of the biggest splashes amid a strong showing in the major equity indices today, popping up more than 25% so far. Specializing in video-game engine software and helping developers monetize their games, Unity delivered mixed results for the third quarter. However, it also delivered a Q4 revenue guidance hike. That said, despite Wall Street bidding up U stock today, broader challenges remain.
For the headline numbers, Unity reported a third-quarter loss of $253.7 million, or 84 cents per share, according to MarketWatch. This contrasts with its net loss of $155.1 million, or 41 cents per share, in the year-ago period. Adjusted for non-recurring items, Unity’s Q3 EPS loss came out to 14 cents. In Q3 2021, the company’s adjusted loss was only 3 cents.
However, on the revenue front, Unity managed to post $322.9 million. This tally compares very favorably next to $286.3 million in Q3 2021. According to FactSet, analysts had targeted a loss of 15 cents per share on $326.1 million in revenue. Still, it’s worth mentioning that Unity’s Q3 revenue aligned with management’s prior guidance.
Most notably for U stock, though, is the fact the company forecast Q4 revenue to hit between $425 million and $445 million. Unity also hiked its full-year revenue forecast to a range of between $1.37 billion and $1.39 billion. Previously, analysts had anticipated Q4 sales to reach $377.8 million.
U Stock Still Has a Mountain to Climb
Unity’s overall positive disclosure followed shortly after Wednesday’s closing bell. Then Thursday morning, U stock immediately popped higher. At time of this writing, shares are now up more than 25% for the day. Prospective investors should realize that this security still has a mountain to climb, however.
For one, against the trailing five days, U stock trades at parity. In the trailing month, shares have also slipped about 14%. And in the year so far, Unity has shockingly lost about 80%. Therefore, the wider assessment remains incredibly pessimistic.
As CFO Luis Visoso conceded in the report, despite the aforementioned Q4 guidance hike, Unity is “taking a prudent approach in the fourth quarter, given the current macroeconomic environment.” To be fair, a recently disclosed lower-than-expected inflation report has bolstered enthusiasm in the major indices. It’s possible, then, that some of this enthusiasm can benefit the company’s business.
However, Unity also suffers from enterprise-specific headwinds. Most notably, AppLovin (NASDAQ:APP) abandoned its $20 billion offer to acquire the company in September. Unity is also still reeling from a flaw it discovered in its proposed workaround to the Identifier For Advertisers (IDFA) opt-out option by Apple (NASDAQ:AAPL).
Roughly from this discovery until now, U stock has dropped over 45%. Thus, any investors considering Unity must have incredibly strong conviction.
On the date of publication, Josh Enomoto did not hold (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.