In a report released today, Brian Fitzgerald from Wells Fargo maintained a Buy rating on Unity Software (U – Research Report), with a price target of $40.00.
Brian Fitzgerald has given his Buy rating due to a combination of factors that suggest a strategic realignment and potential for long-term growth at Unity Software. The company’s decision to divest its Digital Twin Professional Services (ProServ) division to Capgemini is viewed positively, as the deal likely favors Capgemini but also aligns with Unity’s strategy of focusing on higher-margin businesses. This move is consistent with Unity’s shift away from low-margin ProServ towards more scalable and profitable offerings, which is expected to better leverage the accelerating adoption of digital twins (DT).
Furthermore, the sale of the ProServ business to Capgemini is part of a broader strategic alliance that creates one of the largest pools of Unity enterprise developers globally, which bodes well for the future of Unity’s DT business. Fitzgerald believes in the long-term opportunity presented by the growing industrial adoption of real-time 3D technologies, as indicated by Unity’s performance in the DT sector and the potential for their Create for Industry segment to outpace their core game engine business. The focus on repeatable solutions that generate ratable revenue streams, along with Capgemini’s commitment to scale high-demand sector-specific solutions, underscores Fitzgerald’s optimistic outlook for Unity Software’s stock.
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Unity Software (U) Company Description:
California-based Unity Software Inc. is a video game software development company. The platform provides software solutions to create and monetize interactive, real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices. The products are used in the gaming industry, architecture and construction sector, animation industry, and designing sector.
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