Why 1 Analyst Is Betting on 30% Upside for This Beaten-Down Software Stock

Artificial intelligence (AI) anxiety has cast a long shadow over software stocks, and interactive software platform Unity Software (U) has not escaped the storm. Investors are questioning whether emerging “world models,” including Alphabet (GOOG) (GOOGL) Project Genie, could upend traditional game engines and erode Unity’s relevance. 

The skepticism pressured Unity’s shares in recent weeks. However, on Tuesday, Feb. 10, sentiment shifted decisively when the stock climbed 5.6% intraday after investment banking firm Oppenheimer Holdings upgraded U stock to “Outperform” from “Perform.” 

Oppenheimer analyst Martin Yang has directly challenged the disruption narrative, describing concerns about world models replacing game engines as “fundamentally misplaced.” He argues that critics have misunderstood Unity’s architectural role in development workflows and emphasizes that experimental AI tools do not simply replace deeply embedded platforms. 

Yang supports his stance with measurable progress, highlighting the successful re-acceleration of Unity’s Grow segment and underscoring management’s disciplined cost controls. He projects adjusted EBITDA margins will expand to 26% by 2026, up from 22% in 2025, reflecting a four-percentage-point improvement. 

If Unity delivers on these targets, it can silence doubters and shift the narrative in its favor. 

About Unity Stock

Headquartered in San Francisco, California, Unity Software delivers a real-time development platform that enables creators to build and scale interactive 2D and 3D experiences across mobile, PC, console, and extended reality devices. 

The company commands a market cap of approximately $12.4 billion and equips developers with AI-powered tools, monetization and advertising services, enterprise-grade support, and professional consulting solutions. 

U stock has declined 35.5% over the past six months, reflecting near-term pressure, with shares gaining 9.79% in the past 52 weeks. 

However, the stock has plunged 14.15% in just the past five trading sessions, driven by its latest earnings release, as the company issued disappointing guidance for the first quarter of fiscal 2026.

From a valuation standpoint, U stock is trading at 34.58 times forward adjusted earnings and 6.76 times forward sales. While both multiples exceed industry averages, they remain below their own five-year average levels, suggesting a relative discount and a potentially compelling entry point.

Unity Surpasses Q4 Earnings

On Feb. 11, Unity reported its fiscal 2025 fourth-quarter results, in which the company generated $503.1 million in revenue, up 10.1% year-over-year (YOY) and ahead of the $488.95 million analyst estimate. Adjusted EPS rose 20% from the prior year’s quarter to $0.24, surpassing the $0.21 Wall Street forecast. 

Delving deeper, Create Solutions delivered $165 million in revenue, rising 8% YOY on strong subscription growth that reflects durable developer engagement. Grow Solutions produced $338 million, up 11% YOY, powered by mid-teen sequential quarterly growth in Unity Vector, which contributed 56% of total Grow revenue in the quarter.

The company strengthened profitability as well. Adjusted EBITDA totaled $124.9 million, improving 17.7% from the year-ago period. Furthermore, Unity ended the year with $2.1 billion in cash and equivalents, up from $1.5 billion a year earlier. 

Looking forward, management expects first-quarter 2026 revenue between $480 million and $490 million and adjusted EBITDA of $105 million to $110 million. Meanwhile, analysts are projecting fiscal year 2026 EPS to surge 466.7% YOY to $0.11. 

What Do Analysts Expect for Unity Stock?

Analysts have grown increasingly constructive on Unity, and Oppenheimer’s latest upgrade simply adds to an already strengthening chorus. The firm has set a $38 price target for the stock, signaling almost 77.5% upside from current levels. 

However, before Oppenheimer acted, other prominent analysts had already leaned bullish. Morgan Stanley’s Matthew Cost maintained an “Overweight” rating and increased his price target to $52 from $48. Meanwhile, Jefferies Financial Group analyst Brent Thill also reaffirmed his “Buy” rating and lifted his target to $55 from $49. 

Wall Street has assigned U stock an overall rating of “Moderate Buy.” Out of 22 analysts, 13 have issued a “Strong Buy” rating, one recommends “Moderate Buy,” seven advise to “Hold,” and one has flagged a “Moderate Sell.” 

Analysts continue to see clear upside potential in Unity’s shares. The average price target of $46.52 signals a 117.3% appreciation. Meanwhile, the Street-high target of $60 points to a gain of 180.2% from current levels.

On the date of publication, Aanchal Sugandh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.