Unity Software Inc. (NASDAQ: $U) operates the world’s leading platform for creating 2D, 3D, VR, and AR content. The platform is widely used to create video games and other digital simulations. It first launched in 2005 and was targeted at the video game industry. However, it is now available to other sectors, including car manufacturing and film industries.
Unity Cuts Workforce
On Tuesday, January 9, 2024, Unity stock (U) fell 7.3% during the afternoon trading session. The fall came after the company announced it would reduce its workforce by 25%. That will see around 1,800 workers at the company laid off as part of a restructuring program to drive profitability.
The company expects to incur severance payments, employee transition, and benefits costs. It expects to incur most of these costs in Q1 2024. The stock price drop is likely due to investors being cautious about Unity’s path forward. Its planned restructuring has likely introduced uncertainty in its near-term growth prospects.
The recent workforce cut is not the first time Unity has announced layoffs. That might have spooked some investors as the company’s prospects are not lucrative. The recent cuts are a significant change from the pandemic when the company stock soared by over 120% in 2020.
Unity will release its Q4 fiscal 2023 results on February 26, 2024. Many investors will be waiting for those results to determine what the future holds for the stock. Until then, many are likely to remain on the sidelines.
During early trading on Wednesday, January 10, 2024, U stock appeared to have recouped some of the losses from the previous session. It is up 4.18%, trading at $37.43 per share. The stock has gained 20.30%, indicating that its restructuring efforts have paid off. However, the stock current price is at a significant discount on its 52-week high of $50.08. YTD, the stock is down 6.28%.
Stock analysts give U stock a moderate buy rating. They predict a high price of $61 and a low of $16. The analysts’ average target for U is $37.24, a 0.87% decline on the last price.
Should You Buy Unity (U) Stock?
Unity stock has fallen from its pandemic highs. The company’s game development business suffered after the easing of pandemic measures. However, it has been working to grow outside the gaming market, including work on AR and VR apps.
The company is still profitable on a GAAP basis and is working to boost margins with layoffs. However, some analysts believe the stock is a bit pricy compared to its recent performance. As such, waiting on the sidelines could be a smart decision. Once it releases its Q423 earnings report, deciding whether to buy or not will be much easier.
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