Unity Software Inc

Section 1: Company Overview and Fundamentals

1.1 Company Overview:

Unity Software Inc. (Unity) (NYSE: U) provides a platform for content creators. The Company's platform provides real-time three-dimensional (RT3D) development tools and services for creating interactive, two-dimensional (2D), 3D, augmented and virtual reality experiences across all major platforms and device endpoints. The Company has two complementary and interconnected solutions: Create Solutions and Grow Solutions.

Kalkine’s Diversified Opportunities Report covers the Company Overview, Key positives & negatives, Investment summary, Key investment metrics, Top 10 shareholding, Business updates and insights into company recent financial results, Key Risks & Outlook, Price performance and technical summary, Target Price, and Recommendation on the stock.

Stock Performance:

• The stock has corrected by 26.02% in the last three months as well as by 36.31% in past nine months.
• The stock is leaning towards the lower band of its 52-week range of USD 50.08 and 52-week low price of USD 22.20, with the current price near an important support zone of USD 24.00-USD 36.00, with expectations of support from the these support levels.
• The price is currently below both its short-term (50-day) SMA and long-term (200-day) SMA, with the current RSI of 30.86.

1.2 The Key Positives, Negatives, and Investment summary

1.3 Top 10 shareholders:

The top 10 shareholders together form ~47.69% of the total shareholding, signifying concentrated shareholding. Sequoia Capital Partners Inc., and Silver Lake Partners are the biggest shareholders, holding the maximum stake in the company at ~10.06% and ~9.14%, respectively.

1.4 Key Metrics:

The current ratio for Unity (U) in the third quarter of fiscal year 2023 stands at 2.60x, reflecting a higher ratio compared to the industry median of 1.78x. In terms of free cash flow, Unity demonstrated a significant improvement from the third quarter of fiscal year 2022 to the third quarter of fiscal year 2023, with a shift from a negative value of USD 116.6 million to a positive value of USD 178 million. These financial metrics underscore Unity's enhanced liquidity position and positive cash flow generation, surpassing the industry median in the specified period.

Section 2: Business Updates and Corporate Business Highlights

2.1 Recent Updates:

The below picture gives an overview of the recent updates:

 2.2 Insights of FY23:

Section 3: Key Risks & Outlook

Section 4: Stock Recommendation Summary:

4.1 Price Performance and Technical Summary:

Stock Performance:

• The stock has corrected by 26.02% in the last three months as well as by 36.31% in past nine months.
• The stock is leaning towards the lower band of its 52-week range of USD 50.08 and 52-week low price of USD 22.20, with the current price near an important support zone of USD 24.00-USD 36.00, with expectations of support from the these support levels.
• The price is currently below both its short-term (50-day) SMA and long-term (200-day) SMA, with the current RSI of 30.86.

4.2 Fundamental Valuation

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is March 13, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: The report publishing date is as per the Pacific Time Zone.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

 Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

 Stop-loss: It is a level to protect against further losses in case of unfavorable movement in the stock prices.

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