Unity Software's shares have taken a hit this Tuesday following the announcement of CEO John Riccitiello's retirement and a less than promising outlook for 2023. The retirement comes in the wake of controversial pricing changes, a stagnant digital ads business, and a failed bid for ironSource. The company's shares are now down 60% from their initial public offering (IPO).
According to InvestingPro data, the company's shares have experienced significant price drops over the last three months, with a total return of -38.41%. The stock's volatility is also evident in its one-month total return of -21.86%, underscoring one of the InvestingPro Tips that the stock's price movements are quite volatile.
Despite an 11% increase in Q2 2023 revenue to $533 million, Unity remains unprofitable, reporting a net loss of $193 million. InvestingPro's real-time metrics show a more detailed picture of the financial situation. The company's revenue growth for LTM2023.Q2 was 48.25%, and its operating income, adjusted for LTM2023.Q2, was -917.78M USD, reflecting a negative operating income margin of -50.77%.
The company's poor performance has been further underscored by its disappointing guidance for the remainder of 2023. This aligns with another InvestingPro Tip that the company has not been profitable over the past twelve months.
Meanwhile, AppLovin, which had previously proposed a $17.5 billion merger with Unity, has turned its fortunes around and is now profitable via its software subscription service. Citigroup (NYSE:C) analysts view AppLovin as a potential suitor for Unity, given the latter's current market cap of $10.8 billion.
AppLovin's recent balance sheet cleanup and stock repurchase have further enhanced its appeal. Additionally, the Federal Reserve's interest rate policy is seen as making AppLovin more attractive.
InvestingPro Tips highlight that Unity's management has been aggressively buying back shares, which could be a strategy to bolster the company's stock price and attractiveness to potential buyers. For more insightful tips like these, consider checking out the InvestingPro product that includes additional tips. There are 12 more tips listed in InvestingPro that could provide valuable insights for investorshere.
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