Management of Unity Software Inc. think they have found a way to avoid falling from versions of the Apple Inc. mobile operating system
It turned out they were wrong and Wall Street punished Unity
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Wednesday's stock.
The stock lost more than a third of its value, worth about $ 5 billion in market value, and was looking forward to its worst day after the game engine company introduced what several analysts call a “self-inflicted wound” on their advertising tools. . The decline began with a Tuesday after-hours session, with Unity executives predicting quarterly and annual revenue below Wall Street estimates and first-quarter results online.
Up 37% shares reached an intraday low of $ 30.16 in Wednesday's session, setting the day for the worst day since the September 2020 IPO, when the stock traded at $ 52 each. The stock is currently 84% below the all-time close of $ 201.12, set for November 18th.
The biggest problem Unity reveals is that the company's Pinpointer advertising product in its Operate Solutions business, which helps developers monetize their games and content through ads, has been found to be faulty and customers are spending less money due to inaccuracies. back in august Unity's Operate business was a big driver, as it seems the company has managed to restructure Apple Inc.
opt-out of Advertising Identifier or IDFAin for its privacy update, a change that has affected online advertising companies such as Meta Platforms Inc.
Facebook.
Unity reportedly uses ad models that did not rely on data from Apple, but instead used data from end-user engagement and platform performance data. Customers flocked to the tool but soon found that it did not meet the challenge, analysts said Wednesday as they reduced prices.
Morgan Stanley analyst Matthew Cost, who weighed in and reduced the target price from $ 110 to $ 50, quickly pointed out that the Pinpointer tool grew in popularity due to Apple's IDFA changes and “grew to represent a significant portion of advertising revenue through IDFA. Unity ad network last year. ”
"We believe the main driver of targeting reduction was a retreat in ad loss, as customers reacted to the weak performance of the ad network in Q1 / before Q2," Cost said. "Once the major issues have been resolved, it will take some time to retrain the machine learning algorithms and reimburse the costs of the ad moved earlier this year."
"We also believe the direction includes a second impact, as engineers who have been evacuated to address these issues were forced to delay some of their projects (many of which could have contributed to the increase in revenue) until later on 22/23." Specified costs.
In a book entitled “The Wound of Self-Injury,” Jefferies commentator Andrew Uerkwitz, who estimated the value and lowered the target price from $ 100 to $ 40, said that "incorrect customer ID data" had caused the error. .
"In February and March, Unity lost its share of competitors due to the poor performance of its competitors," said Uerkwitz. "Adding insult to injury, a lack of system reversal means that instead of resetting, Unity needs to re-learn using the right data and this will take time."
Wedbush analyst Michael Pachter, who rated high and lowered his price to $ 70 from $ 125, said "the self-inflicted wound should be resolved before Q4 and should allow the company to regain 30% of its track record." . or high growth in annual income. ”
"While we think it is possible, and likely that the Union will grow much faster than we have estimated, we think it is prudent to set a low rate compared to the magnitude of the company's self-inflicted wound over the last quarter," he said. . Patcher. .
Stifel J. Parker Lane analyst, who has a buy-in ratio and reduced the target price from $ 150 to $ 100, expects that “the Union's strong position in the mobile gaming industry and a growing set of monetary tools will help the company return to normalcy in due course. , and growth in income over the course of the year. ”
"Overall, we believe that non-gaming directors will continue to offer long-term growth opportunities, and Operate business stability will help the company achieve 30% + long-term growth vision." Said Lane.
Of the 18 analysts comprising Unity, 14 have purchasing rating levels, three have participation rates and one has sales ratings. Of those analysts, 11 sharply reduced their target price on Wednesday, leading to a target of $ 79.63, down from $ 139.31 earlier.
