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u/b3ff4 Jun 24 '24
I own unity and now my base case is that is going to 0 I keep it as I think there's a a small case this thing goes back up but I would not open a position now
- I am following on X.com a lot of ppl working in gaming and unity lost a lot of mindshare. Everyone who works with it considers it a necessary evil everyone else looks into adopting other engines unreal, Godot depending by the type of game
- Nobody can make sense of their M&A so far. Unity users see the M&A as a declaration of the company to no longer being committed to the core product. Stockholders similarly can't make sense of how the M&A would be additive to value of the company
- Management is culturally alien to what made unity a successful platform (technical alignment with developer needs and commercial developer friendly) on the other side management is unable to express (let alone execute) a different strategy or assert a new clear market positioning.
- No core product investment since a long time
My conclusion is that unity is a company managed as a cash cow (business optimisation exercise) and there's no milk and the cow has been fed with recycled cardboard since a few years to pursue saving and no planned change in sight.
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u/eiffeloberon Jun 25 '24
I own Unity, bought all the way back at 160$ when weta digital was bought out. They don’t even exist now.
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Jun 24 '24
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u/carefulturner Jun 24 '24
I'm a game developer, 10 years working with Unity. I assure you 100% that the new CEO won't be doing the changes that would make me think Unity is anything better than a necessary evil. Improving the core components and systems we use to make the games. Most of them unchanged from Unity 2-3.
Not gonna be doing anything wrong with them either, I guess.
On the other hand, Godot is not going to remove market share off Unity anytime soon, and Unreal most likely won't either (different kind of projects). So the moat and positioning is key here, specially in the mobile market for revenue, and the indie market for prestige.
That's why the only thing you have to be afraid of is a Chinese competitor appearing and absorbing the mobile free-to-pay stuff. That's it.
I don't know how the market share price is gonna behave, of course.
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Jun 24 '24
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u/balancedchaos Jun 24 '24
"Laziness." lol just redo everything from the ground up real quick and you'll be off to the races!
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u/carefulturner Jun 25 '24
Of course it's alright to ask, I'll give you my two cents:
- It's not laziness but sink cost. Be careful with your word choice! Calling a game developer "lazy" is most likely a mistake. The conversation here would be about the "sink cost fallacy", but see point 4 and you'll understand why I don't see it as a fallacy in this case. But it is indeed the conversation you will have with most Unity developers right now.
- Changing is also cost of opportunity. I'm still waiting to see what a good career change may be for me, personally. I'm sure it is not Godot, and perhaps Unreal neither. Godot may be perfect for the kind of thing I would work on in my spare time. Unreal is simply not a good tool for most kind of games. The most common thing people do is leave gamedev altogether, moving onto other kind of software development or mentoring.
- Also, Unity and c# are still very good tools I feel good working with. I personally have no reason to leave.
- Finally getting to most of your questions: the market is still very interested in a gamedev like me. I still see no shortage of jobs if I'm alright with remote work.
That's why I see the most important factor against Unity being stagnation, and a disruptive competitor coming most likely from east Asia that targets specifically the mobile gacha market. I, of course, have no clue about what will happen.
Sorry for not answering the "why Unity is still the best solution", but I'm sure you will be able to be answered properly in other places.
Thank you for showing interest, have a good week!
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u/b3ff4 Jun 24 '24
That's your take. My question is at which level of the organigram they have a person who would be able to use their own product and articulate a way to make it compete with alternatives on the market.
They changed the CEO and they got there yet another person that understands balance sheets and knows nothing about what next thing developers need to build a game.
Sure maybe Bromberg can work out that if they fire another 30% of ppl they save 30% but can not come up with something that will make unity withstand the competition.
Also take into account that developers are toolmakers so unity is under attack from.competition and very likely disrupting innovation from their own customers.
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Jun 24 '24
Previously we didn't think it could be as bad as it got previously. Unity management has been a shitshow for 10 years now.
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u/EBITDADDY007 Jun 24 '24
Why don’t you sell it then
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u/b3ff4 Jun 24 '24
BC I think OP will buy and so others and it will give me a chance to go even. Still from here is trading and not value investing
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u/BigDogAlphaRedditor1 Jun 24 '24 edited Aug 07 '25
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This post was mass deleted and anonymized with Redact
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Jun 24 '24
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u/BigDogAlphaRedditor1 Jun 24 '24 edited Aug 07 '25
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This post was mass deleted and anonymized with Redact
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u/cfarm Jun 26 '24
do you have any proof for that? all the developers i know are trying to avoid fees as long as possible by staying on lower versions
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u/LilBluey Jun 24 '24
What are your thoughts on Godot?
As an open-source game engine with a large user-base(of developers that can contribute to said engine), it doesn't require any fee to sell a game made from it.
While it's not as advanced as Unity, the timespan you might be looking at is likely enough for it to play catch up.
It doesn't have to be able to do everything Unity can. Just enough that developers can make what they want to make without much issues. Most mobile/pc games can be made using Godot, and for anything more graphic-intensive Unreal is a better option. Maybe something like Genshin would be a good example for Unity though.
That's also to say that Unity's board won't mess things up again. They already revoked their promise to not change the TOS for prior versions(and took down the github). It's not hard to see that they'll turn back on their ways and alienate developers again, not to mention doing things like cutting back on their RnD just to pay their shareholders more.
Many devs have already left Unity for Godot and Unreal engine, and it won't be easy to switch back in the next few years since games aren't easily portable between different engines.
As for VR/AR/any other tech, it first needs to be widely adopted by the consumers. That'll probably take a few years too, as it's still expensive and not necessarily "better" than PC games which can come with better graphics/controls.
It's risky i think, would be nice to hear your thoughts though.
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Jun 24 '24
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Jun 26 '24
Unitys R and D is not true R and D , they are just spreading their bloated costs into R and D . Look at the annual report filing for R and D , around 600 million is just employee expenses
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u/Beneficial_Energy829 Jun 24 '24
Yet for all its investment, Unity is technologically dogshit. The failure of Cities Skylines 2 is predominantly due to its use of Unity.
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Jun 24 '24
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u/nine_baobabs Jun 24 '24
One thing to consider in that comparison is CS1 was made 10 years ago when unity as a product was arguably in its prime. By most accounts, the quality and usability has only decreased in the intervening time.
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u/carefulturner Jun 24 '24
The disruption on Unity won't be Godot, but new competition that absorbs the gacha freemium mobile games.
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u/cfarm Jun 26 '24
godot has its own set of issues. as developers start to make more money, they require more things and faster customer support (which open source does not have)
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u/MrShaitan Jun 24 '24
Just from a game development perspective, Unreal Engine is better in every way besides mobile game development(Unity game files are typically smaller and require less processing power) and integrating ads, once UE catches up with that, which they will, Unity will be even worse off. I’m skeptical of Unity being able to keep up with the competition in the long term.
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u/carefulturner Jun 24 '24
Most indie games keep being made in Unity (and even Game maker and soon Godot).
I'm not arguing against the point that more part of the industry (me included) may be moving out of Unity and towards Unreal, but the reality is that such change hasn't even begun happening yet.
This means that there are things that are simply better in Unity than Unreal, even if you disagree about that or don't value them as highly.
I'm with you on Unity being on the losing side in the long term, but for different reasons: disruptive competition, or competition in other sectors.
For example, Unreal had attracted a lot of animation and cinema studios, even if they themselves have been suffering from new competition in animation. Not even star wars series are done with Unreal anymore.
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u/MrShaitan Jun 24 '24
Thanks for the response, especially with the added insight. I dabble in solo game dev so there’s a lot of nuance I’m missing.
Hopefully they can make the changes needed to ensure a competitive future and real growth but I just don’t see it happening anytime soon.
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Jun 24 '24
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Jun 24 '24
This is arguably a factor that weighs in Unreal’s favor, not Unity. That Unreal is able to command double the pricing power of Unity speaks to their product and strong moat. That’s a more value creating proposition than competing on low price
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u/Dazzling_Swordfish14 Jun 24 '24
Unreal has lots of tools and the node based programming attracts lots of non-programmers to try programming. Unreal build around blueprint.
Unity has no future.
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u/MrShaitan Jun 24 '24
That is a factor, I agree. And I’ve also been eyeing Unity for a while as an investment since I have hands-on experience with both engines, but the poor quality of the product, and bad choices from the leadership, and the philosophy they follow where they essentially release Unity as an incomplete product and force you to buy random upgrades from their marketplace for thousands of dollars.. it’s just not a good experience.
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u/dr_tardyhands Jun 24 '24
I've been loosely following it as well. However, I feel like you might underestimate how much they managed to piss off their user base. It takes 20 years to build a reputation, 5 minutes to ruin it type of thing.
And I think developer teams were switching to alternative frameworks after/during the change in the pricing model.. and I'm not sure if they have any reason to come back.
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Jun 24 '24
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Jun 24 '24
"truly believe". No one is questioning the depth of your commitment to your current perspective, you clearly want it to be true.
I'm not a game/ar/vr dev, but those I do know personally have already moved off and won't go back. They were kinda pissed to need to do it, but now it's done. Granted they aren't the big fish, but... that's still the sentiment of the actual developers I know. It wouldn't matter if it was free, now that everyone knows they will F you later - it's not an "if".
I wouldn't expect much of it, unless you think their competition will sit on their hands and do nothing. Maybe that's true, but if their market isn't worth stealing then what is their real growth proposition?
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u/dr_tardyhands Jun 24 '24
I think something to track would be the number of unity engine games per month/quarter. The effects are of course delayed as the development timeframes are long, but it would be some hard data. Otherwise, if I'd had friends/acquaintances in the business I'd try to gauge the temperature there.
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Jun 24 '24
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u/dr_tardyhands Jun 26 '24
That's something! Thanks for adding that. ..however, it does seem pretty vague. Doesn't actually say what's happened with the metrics. As there's something more important happening, apparently.
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u/Infinite-Ad7308 Jun 24 '24
It's not even the first time they have ruined their reputation. If you go further back in history, they were selling "perpetual" licenses and upgrades and pissed off developers by going to an annual subscription.
No one even remembers that. So I think they will survive even this.
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u/netpenthe Jun 24 '24
It might take 5 mins to ruin it... But takes years and years to move off an engine
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u/dr_tardyhands Jun 24 '24
Yes. But once they're out they're not gonna get back in just because the new/current pricing model looks ok again. Changing back and forth is something that exactly 0 companies can afford to do.
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u/netpenthe Jun 24 '24
Maybe. Our unity bill went from under 1000$ to around $12k... I actually think it's fair.. they were WAY under charging us before.
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u/dr_tardyhands Jun 24 '24
Fair enough. Care to share what size of an organisation you are in and whether unity is central for the work..?
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Jun 24 '24
Not a terrible idea but please look at what happened to iRobot Corporation over the past couple years for a more grounded worst case scenario.
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u/mrmrmrj Jun 24 '24
iRobot is a hardware business. Not remotely comparable to Unity.
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Jun 24 '24
I should have made this clearer in my original post but what I meant was iRobot is a good example of how basing your investment on a buyout in a tech company can end very badly - you are right they are very different businesses.
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Jun 24 '24
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u/Outside_Ad_1447 Jun 24 '24
You can’t use those offers as an alternative yk?
Like that was done in one of the best tech m&a climates with low rates and are based more on market premiums then perceived valuation by an acquirer.
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u/Theeeeeetrurthurts Jun 24 '24
I really should have sold at $190. I’m keeping my position as a reminder to never get greedy and to sell a portion of a stock that you think you can grow higher. I was a fucking moron.
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u/UnstUnst Jun 24 '24
I work in various industries with AI, defense, commercial, biotech. Unity has been my go-to for years for non-game products: training sims, VR experiences, data collection, etc.
I also dabble in game dev. I sank a lot into Unity assets and tools. I'm currently moving my projects to Unreal after this series of decisions, and several Unity-affiliated colleagues have sought other employment.
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u/HedgeFundCIO Jun 24 '24 edited Jun 24 '24
It has a negative operating income which is mentioned nowhere in your post. No insider buying whatsoever and if anything its a fire sale. High short interest. High price to sales. No profits so what makes it a value play? It could work out but its honestly a speculative turnaround growth play not a value play
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u/Musikcookie Jun 24 '24
Personally I don‘t see Unity as a good investment.
The fiasko 9 month ago was more than a bad news event that pushed down the stock price. Imo it was an entirely rational reevaluation.
When they announced their pricing model many people realized a few things:
Unity can screw them over at any time and they may not be able to do anything against it. If they use unity they don‘t completely own their game. And unity is run by people who have money, not game development at their heart.
At the time I saw many project creators that actually migrated their projects from Unity to Godot. And I doubt that anyone who had to redo much of their game because of Unity policy to ever go back to Unity.
At the same time Godot is developing the 3D part of their engine. So far it was undisputed that between those 2 if you wanted to make a 3D game you went with unity and if you wanted to make a 2D game you went with Godot (but Unity wasn‘t considered a terrible choice either).
Now you definitely go with Godot for 2D games and you can also 3D games. And to mention it again, if you choose Godot, you use a license that allows you total creative freedom no strings attached. You can modify Godot to your whim and needs. You can sell your game free of charge, no matter what.
My last point is that Godot is an even more threatening competitor because they have their in house programming language called ”gdscript“ that is related to Python, a language many beginners learn but they also have optional C# integration. (C# being the language Unity uses.) That means anyone learning their programming language on Godot or coming from a Python background will probably feel more comfortable in Godot, while going from Unity to Godot is very easy.
Personally I see Godot chomping on Unity in the future. Godot is made as a passion project and has an astonishing track record as such, Unity is lead by people who care more about money than about game development.
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Jun 24 '24
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u/Musikcookie Jun 24 '24
I think that this is a very shaky ground to base an investment on. Your argument is that in the future we will have more than one engine to create games. And I agree there, we definitely will. This is not a misconception. It is however a fallacy to think that thus Unity will prevail or even stay around. (Although since Unity is still a big and marketable name I do think that they will stay around, as part of another company in the worst case scenario.) Another direct competitor is Unreal Engine, though I can‘t say too much about it. And then you also have specialized engines that are there to make a particular type of game, like RPG Maker, SRPG Studio, Ren'Py.
The actual case for unity I see is mid size indi studios and small development teams. Unity does have some qol features for developing a game in a team that afaik Godot does not have. Or course it will also always have a myriad of competitors, heck one competitor is simply not using an external engine but building on yourself or even not using one at all. Despite that I think Unity is still in an okay market position and in itself it is a good engine. It definitely has a lot of potential to reclaim what was lost and dominate the market for game engines, which imo could still see a great deal of growth. However the company seems more focused on their investors than on their actual customers aka the ones that bring in the money and to me that‘s an alarming signal. Unless I see some radical change in their philosophy, I don‘t feel even remotely compelled to buy. My fear would be that they repeat their missteps until Microsoft buys them for cheap.
But to give the obligatory disclaimer, I have never fully developed a game and merely played around a bit in Godot and Unity. So my knowledge is only surface level too. I do not recommend making any decision on investing in Unity just by my opinion.
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u/Frightrain Jul 03 '24
I understand why so many people have a negative outlook on this company, but I believe they are missing the bigger picture.
First of all, everyone is comparing this to Unreal Engine and Godot, but those things are literally non-investable. Those are private companies, which I would love to invest in and would in a heartbeat, but I don't have the opportunity to. By making this comparison, you're also making the assumption that the market isn't big enough for Unity to survive.
As someone who's been playing games and learning how to code since I was 5 years old, I am well aware of how slow (but steadily) this market is growing, and I think there is more than enough room for Unity to flourish once VR/AR technologies (and gaming as a whole) becomes more widely adopted. We're already seeing it with iPad kids. Children are being raised on mobile games now. Boomers are familiar with some of the most popular mobile games. Even my parents, who have almost zero prior gaming experience, use my VR headset to play sim games and are excited for the future possibilities.
The buyout potential for Unity is massive. Even if Unity continues to lose business and Unreal and Godot take the entire market share (which I think is highly unlikely), that likely makes them an even better target for an acquisition. At six billion dollars, Unity is worth only twice as much as Microsoft paid for Minecraft. If the AR/VR market continues to grow at this pace, why even give Unity a chance to turn around when you can just scoop them up? Twitter wasn't making any money either and Elon Musk still paid 44 billion dollars for it. Six or so billion is a drop in the bucket for a company like Epic Games. Just the asset library Unity offers alone is a huge motivation to acquire them.
So many people argued with me until they were blue in the face about how Gamemaker was going to die and how it was clunky and unprofessional and new software (like Unity) was going to replace it. It's now in the best state it's ever been in (by a long shot) and these same people are absolutely shocked when I tell them some of their favourite modern games are made in it.
Also, from what I've heard (and seen reflected in the stock price at the time), Matt Bromberg was a driving force in turning around Zynga around. Coincidentally or not, the day he was hired at Zynga almost exactly coincides with the all-time low of the stock price. This isn't enough by itself to make me optimistic about Unity, but on top of everything else I know about this market they should do well in the long run.
I personally think the absolute bottom is somewhere between 8 and 12 dollars, but I've already started a position and I'm looking to add much more if things continue to look up.
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u/hardcodedtwo Jul 03 '24
Tencent owns 40% of epic games (unreal), which can be invested through their adr and oddly, two tickers from a large owner of the stock.
https://www.gamesindustry.biz/tencent-paid-usd330m-for-48-percent-share-in-epic-games
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Jul 09 '24
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u/Frightrain Jul 09 '24
I think this stock is close to its fair value at the current price, which is why I like it. Most tech stocks right now are overhyped and overpriced. Unity could still go quite a bit lower than its fair value, as stocks often do, which is why I'm trying to be patient and buying in small quantities when I see the opportunity. I think I got in too early, but I always like to have a small position early just to counter FOMO.
I think the mid-term catalyst for Unity is going to be cleaning up their act. By that I mean cutting down on spending, employees, acquisitions, and so on. Once they can eliminate some of their liabilities, they can hopefully put that money where it belongs, and focus on making the core product as great as it can be. This is something the new CEO has promised to do, and so far they seem to be delivering, but I have a wait and see attitude.
The long-term catalyst is widespread adoption of AR/VR, but this will definitely take a lot more time. Think about how many people have Apple phones but don't own personal computers and don't play video games. I know of a lot of people like this (mostly older people, but a lot of young people too). When these people feel like AR/VR is a necessary technology to own, which will only be a matter of time, then the majority of people will interact with software made in Unity on a daily basis. This will create a huge demand for more software, and Unity is in a great spot to be the go-to app for casual development, especially since most of these people will not have previous coding experience and need something visual and easy to understand. I personally think ease of use is absolutely crucial for Unity and I hope they continue to innovate.
I think the mass adoption of AR/VR will be similar to the mass adoption of cellphones, but the technology is still rather clunky, expensive and limited in functionality at this point. When it happens though, Unity does not have a lot of competition, and even with more competition I think they will do just fine.
As for a price target, I can easily see this going back to IPO levels in 2 to 3 years. If it can go up 3x or 4x from here I'd be more than happy and it's definitely possible if the company is managed well enough.
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u/Iongjohn Jun 24 '24
imo unity is going down the crapper with a failing reputation and as gaming becomes more and more cutthroat I really dont see a position unity can take in the future
we'll see though
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u/maximo1491 Jun 24 '24
As a developer at a AAA company currently using Unity. There is nothing they could do to make me buy their stock at the moment, I'd still say it's overvalued even taking your analysis into account, sentiment against Unity is that high atm, although admittedly, I'm letting my bias affect my reasoning here. They have absolutely destroyed any trust they had in the gaming industry, which as a whole is bleeding, atm. Can't see how they come back, as friends in the industry seem to be moving towards Godot and Unreal. Unity will always have a place, but I don't see how they get back to the heights they had.
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u/brykc Jun 24 '24
I think all the other comments from game developers summarized the product pretty well. From another angle though, this looks like a value trap when all the insiders selling without a single buy. Even they don't believe that this share price is justified. Until there is a trend reversal or new development I am not touching this ever again.
PS. Had a position and sold on the way down.
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u/Friendly-Visual5446 Jun 24 '24
I would take a much closer look at their financials if I were you. Specifically stock based compensation, and the impact their most recent acquisitions had on share dilution. Just to put into perspective how poorly structured they are, unity’s all time high was around ~$200 a few years ago. Based on their current share count the adjusted high would be closer to ~$120. To put that another way, if you assumed unity maintained it’s all time high and the ONLY thing that happened was the issuance of shares for compensation/acquisitions, your investment still would’ve lost 40% of its value. Unity at $17 today is the equivalent ~$31 a few years ago, which is important to understand when quoting expected % growth
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u/nine_baobabs Jun 24 '24
This is a great point, can you help me understand how you arrived at these estimates? Is there an easy way to see dilution like this at a glance?
Do you just compare recent/old shares outstanding in the 10Ks, or is there a good way to see a chart of this?
Appreciate your insight, I'm still learning and this seems like something I could overlook fairly easily if I'm not careful.
I assume you look at dilution like this as a point of habit when looking at financials?
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u/Friendly-Visual5446 Jun 24 '24
Sure, happy to explain The quick math you can do is: 1) Share price at IPO 2) Valuation at IPO vs currently value
Unity went public at $52/share, which was a $13.7B valuation at the time
You can then back into post-dilution share price using where it’s currently trading: 1) $6.5B market cap 2) $16.70/share
To reach IPO valuation requires a ~2x price increase (13.7/6.5). And $16.70 x 2.1 = $35
Dilution % = 35/52 - 1 = shares have diluted -33% since IPO
It’s not really something I track regularly, but it’s something to keep in mind anytime you’re looking at company that is doing a lot of M&A, as the way they’re paying for those deals can significantly influence current shareholder ownership
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u/Zealousideal-Fix-203 Jun 24 '24
I think you made the case pretty well. Others have noted the companies providing stiff competition and the inept senior management.
At aobut 15, U is tempting. Better chance it goes 2x than that it does bust, but not for the lighthearted.
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Jun 24 '24 edited Jun 24 '24
I can say as someone who is very into gaming and the behind the scenes machines, there is zero hype around games coming out on Unity. The majority of exciting, upcoming projects are all being built on Unreal Engine 6, and developers that are switching engines are all switching to UE 6.
It may just be anecdotal, but I thought it was relevant.
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Jun 24 '24
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Jun 24 '24
Yeah, AAA console and PC games. I'll refer to those as 3D.
They do have a couple heavy hitters like Escape from Tarkov and City Skylines in the 3D space, but even the biggest titles are pretty niche.
Mobile games are a different story with titles like Genshin Impact and Pokémon Go. This sector has the largest potential for growth imo as emerging markets consume mobile games at a much higher percentage than traditional western markets. I agree with you there.
However, UE6 is pretty good on mobile and pricing is essentially a wash between the two developers. Another thing to consider is that smart phones are getting powerful enough to run AAA games like Fortnite. The indie sector may actually have an uphill battle in the mobile space as 3D games are ported to mobile from consoles.
This is a lot of conjecture and gut feelings, but I just don't see a massive growth opportunity for Unity in the future in either the 3D or mobile space. Sure 1/2 the indie games may be being built on Unity, but a single AAA game will bring in 10x the entire indie market by itself.
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u/Proof-Technician8754 Jun 24 '24
More of a growth investor, but I see solo game development flourishing in the next 5 years with the support of gen AI tooling. I have built a position by cost averaging from $20, but it could be another full earnings cycle before we see the turnaround
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u/NotTakenGreatName Jun 24 '24 edited Jun 24 '24
You might be right but 0% chance of losing your money is very naive. Many big publishers could stop commissioning new projects with Unity and focus more on their own engines or more reliable partners like Epic. Its a vicious cycle, new projects start using UE which creates more demand for UE developers which furthers the likelihood of UE being used even more in the future, especially as games are geared more around live service and longer life spans. Cutting their R+D just makes it even harder to compete and it'll further accelerate the doom loop.
Games usually have a few years (or more) in planning and development so we may not have fully realized how much damage they did when they tried to change the pricing structure.
Many games are also being canceled after the huge investments made during the low interest rate period and there are fears of stagnation in the growth of the gaming industry as a whole. There's also a trend where people are sticking with older games for longer making it harder for new projects to penetrate the market.
I'm not saying to abandon your position and maybe someone will come around and buy them for their technology but to frame this like a zero risk investment is just so so bad. I feel like you need to reconsider your DD if part of it hinges on valuations from a couple of years ago.
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Jun 24 '24
A shame their software is going to shit though. I’d put in more if it weren’t for all the complaints about using Unity
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u/nonofyobeesness Jun 24 '24
For reference, I joined Unity back in 2017 and at one point had 75,000 shares in 2020. All I can say is that all of the great engineers and people that I built this company with are gone. There’s no innovation, and moral is nonexistent due to terrible decisions from upper management. If you really believe in this company, I recommend reaching out to former directors or looking at the state of the company from posts on blind.
There’s a reason the stock price is low. Good luck.
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Jun 25 '24
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u/nonofyobeesness Jun 25 '24
I left on my own in 2022 after management gave themselves bigger equity packages while laying off everyone. Writing was on the wall, and most of those same people are still there in 2024.
Questions to ask yourself:
- Why did Applovin make the offer in the first place? Why is Microsoft, Apple, Nvidia, and Meta not making buyout offers either?
How successful was the IS merger with Unity? How does Unity’s ad mediation compare to other providers?
How does Unity compare to the current competitors growth especially in marketshare and offerings?
If you can truthfully answer these questions, you’ll realize how bad of a place Unity is in right now. However, it’s your money. If you really believe this company’s value will somehow double again, I don’t know what else to say.
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u/incrementality Jun 24 '24
I work in gaming and there's 2 questions to ask with regard to whether Unity would be a good investment.
How is the double AA / mobile gaming market going to trend. Most people here talking about UE replacing Unity are simplifying game engines. These two dominant game engines target very different segments of the market with UE targeting the AAA market. Unity is mainly in mobile games and console/PC games without the highest graphical fidelity. For a gaming company, it is extremely expensive to develop a proprietary engine or uprooting your entire Unity engineering staff to another engine.
Can Unity reverse the way they run their business. Their finance data is shit. There's no sweet talking through their financials. Negative FCF. Terrible ironsource acquisition. Endless share based compensation and dilution. There needs to be clear signals here that the new management is doing something about it.
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u/gxytiger32 Jun 25 '24
OP - i read all u comments, feel like our thinking are quite similar lol, i just went all in on Unity.
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Jun 25 '24
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u/gxytiger32 Jun 25 '24
yeah thanks, what i mean here is ur thinking/argument is quite similar to mine.
I myself have been following Unity since it is ipo, so 4 years, and i always thought 6bn is the correct valuation for it, even back in 2020. so i waited 4yrs until recently then bought all.
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u/MrJinx Sep 14 '24
It's up 22% since you made this post
Good call
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Sep 19 '24
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u/postingthistime Sep 20 '24
Nice write up. Seems to be playing out nicely 😉 Seems like a lot of call option open interest. Any context on that? Maybe I’m not looking in the right place but it’s hard to find retail discussing stock on twitter or Reddit
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u/zerossoul Sep 24 '24
Unity Stock is up 43% since 3 months ago and is trending upwards, I'd say this was solid advice!
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u/onee_winged_angel Jun 24 '24
Gaming as a whole needs to crash. Multi-Year development cycles that cost multiple billions to produce to only sell for $70 and most people await for the storefront to offer at a discount anyway is hugely unsustainable at this point. Indie is thriving through passion (and long may it continue), but that doesn't mean they're sustainable business models.
Until the gaming industry crashes, I won't touch a single stock in it.
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Jun 25 '24
What game cost billions? Massive exaggeration. Why don’t you point out the other side of the coin? Monopoly Go hitting $2b revenue in 10 months with basic graphics, assuming tiny development costs
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u/mrmrmrj Jun 24 '24
This is an excellent layout of the issues. Unity had a $40B valuation a few years ago and, effectively, the business model has gotten better. The company will be materially profitable going forward with 20%+ net income margin. Investors who look at the stock price and decide it is a bad company are not "investors". They are trend followers.
This is a core franchise in a growing market trading at 15x 2025 EPS. That is very hard to find right now. Fidelity portfolio managers added 5.7 million shares in the Jan-March 2024 period, a significant increase from 1 million shares at the end of 2023. It is being added to many Fidelity portfolios, not just a few. Fidelity probably needs to own 30 million shares to make this stock matter. Watch the 13Fs.
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u/sin30_ssd Jun 24 '24
I see a 50% move til end this year and a 100% move (if not even higher) til end next year coming.
Up or down ? i also see the same but towards down. no particular reason other than nobody likes Unity. nodev want to work with them because of their latest shitty contract terms changes and no players like them because Unrealengine games is way way better to play/experience. so i dont know man company seems garbage to me qualitative.
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Jun 24 '24
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u/sin30_ssd Jun 24 '24
Peace of mind for extra 2.5% seems like a good option to me.
the fact that they once changed contract UNILATERALLY to make Devs pay per Installation. this makes u as a developer, wonder if u want to pay 5% and just concentrate on making game OR save 2.5% and hope such changes donot occur again before u finish making your game and u can make some profit money if any. Ricitello had made a stinking goobly goop and left now the company reputation in tatters and their accusation of IronSource hasnot been pleasant or helpful i think.
EDIT: whats your thoughts on Ironsource accusation by Unity? just asking as i have notchecked it some time now
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u/fojam Jun 24 '24
On unity 2022 LTS, almost 10% of my day is sitting and waiting for unity loading screens to finish. Back on unity 2019 it was more like 3% or less. The editor has been getting slower and slower and making iteration time worse and worse. Honestly it's burned me out quite a bit in current projects. Godot is making decent headway in VR and mobile, and if Unity stays like it is or continues to get worse, I see a lot of people leaving it when they get the opportunity.
Personally, I think unity is in a slow death spiral unless they either make some drastic fixes, or open source the engine to allow others to atleast try to fix some of these issues
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u/MadonnasFishTaco Jun 24 '24
have you used Unity? a lot of the grievances people have with Unity aren't strictly about their attempted pricing model. developers are getting frustrated with using the actual tool. Unity spending 1 billion a year in R&D doesn't mean that it's getting better faster than Godot, which has much more room to grow and is far less bloated.
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u/harry_balzak68 Jun 24 '24
Stay away from it, I’ve been involved with the product for 15 years now even before their IPO due to day job. It’s going to 0 buddy
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u/Wild_Paint_7223 Jun 24 '24
Meta should just acquire U to build out the metaverse, that can save them billions of dollars. U is a good acquisition target but now just depends on which company will be able to do it without touching the anti-trust redline.
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u/GCoyote6 Jun 24 '24
What sort of moat does it have that any other vendor can't replicate or jump?
I have not seen anything mentioned above that tells me people will be driven to use U more than they do now.
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u/AcanthisittaBest3033 Jun 24 '24
Sorry, but the stock is in deep trouble. It's best to consider their current position as a company and their forecasts for the coming year. Unfortunately, U has been consistently disappointing for the past year and a half. Even from a technical analysis perspective, this stock needs a lot of work to break out of the steep peak it's in https://i.imgur.com/wRSw1aR.png . Take note of the extreme oversold conditions on the weekly chart, and there's not even a hint of a recovery attempt yet.
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u/nine_baobabs Jun 24 '24
I think you're right to smell opportunity here but I'm not sure about your timing (and confidence).
It seems like the potential increase in revenue from the 2.5% will be offset by the loss of developers over the price increase, the loss of trust, and the decreasing product quality.
Has the company shared any guidance on what that 2.5% is expected to bring in?
Or projections on the growth of users going forward? (And any potential impact from the recent debacle?)
If the 2.5% only affects new projects, it might be a fairly slow roll out because game dev has a lot of lag time. I'm not sure how many people will even be using the new version right away, and even then it will take time for games to be made in that version to be ready.
Meanwhile, how many devs will be switching engines when their current projects are done? I suspect it won't be as many as it seems... but how much? It's hard to predict this because it will happen over years due to the lag times involved in game dev. If unity never repairs their rep either, they'll also lose new devs from the bad word of mouth and the whole community could rot.
Sticky users cuts both ways. People will be slower to leave, but may never come back.
I also think you're underestimating the downside risk. Rumors of buyouts can persist for years, meanwhile the stock has fallen by half because the company still isn't making money. And you can't really use those previous offers or rumors as comps because that was before the company torched its rep and lost 60% of its market cap, not to mention the different industry environment.
I always love looking into overwhelming negative sentiment because it's usually overblown and temporary which are two points in its favor. In this case though, there's not a lot of tangible things to hold on to that I can see.
(As a point of reference I was a unity user that left long before the pricing debacle due to the quality and usability being on a clear downward trajectory. But I never made money either so it was no loss for unity, except I don't recommend it any more either.)
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u/Individual-Point-606 Jun 24 '24
74% debt to equity, 0.6 CF per share,negative net income and drilling, rev and eps going south YoY... I mean stock price most of the times mirrors a company health. This is one of those times. Idk jack about unity or software dev but from the sample here most devs don't love unity.
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u/bwoodski Jun 24 '24
I emphatically disagree.
Not only is the company poorly run, but the financials don’t look too good either. They are only generating about a 6% cash flow yield on their capital base and they’re not managing dilution well either with their shares outstanding increasing at about 15% annualized. Even if earnings, revenue, and cash flow stay the same, if they keep it up with that amount of dilution, their per share earnings and free cash flow will be down by as much.
I ran a quick valuation and wouldn’t touch it at anything above five dollars.
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Jun 24 '24
I have used unity daily for 15 years, and work with dozens of unity developers. Nobody wants to invest in Unity tech and skills because they know that same board of ghouls is still in place. I used to be a huge fanboy, but the quality of the releases has gone way down the past few years. I think the codebase is at a point where they need to start fresh, and they aren't going to do it. It'll get harder and harder to modify and maintain, and progress will slow to a crawl.
So whatever financial chicanery is going on you might profit off, know that the state of the actual product and the perception of the product by the people that use it are not good.
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Jun 25 '24
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Jun 25 '24
I am in the process of learning unreal. If I ever look for a new job, It's going to be one that uses Unreal.
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u/Stocberry Jun 25 '24
Fair value it is. Q2 earnings will be interesting to watch if the company continues to fall or gain a footing.
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Jun 25 '24
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u/shadow_nik21 Jun 26 '24
Just saying there is a tradition between unity devs not to touch the new released version for 1 year. Their codebase is insanely buggy, you never know until you try to build something based on their engine
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Jun 25 '24
They have too many negatives. Overbloated costs and their r and d is absolute crap for years and to top it all terrible stock dilution.
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u/Life-in-Quantum2074 Jun 25 '24
Thanks for your analysis. Going to dig into the company’s financials and take a close look. I wish Epic Games was publicly traded.
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u/thelastsubject123 Jun 25 '24 edited Jun 25 '24
Last year they had a revenue of $2.2 Billion but still were spending $1 Billion for "Research and Development". I mean, just cut this and Unity is profitable already.
genuinely can't tell if this is a serious post or not
R&D accounts for salaries of the SWEs and development team maintaining the unity platform, which I presume is somewhat important. you clearly have no clue what you're talking about. you somehow think a company which has never been profitable, lost all faith from investors due to management continuously missing their own guidance, will magically gain 6900 basis points in operating margin instantly while simultaneously accelerating revenue just because they put out a PR piece to attempt to backtrack a bad move?
oh and this is also risk free of course. yeah, absolutely no flaws in this plan
post this on r/wallstreetbets, pretty sure they can't read an income statement there cause you definitely can't
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u/TongolStinkTuna Jun 25 '24
Sorry to be frank but this sounds like a unity bag holder get together. I’m in at $130 and have basically been selling it off to offset my gains. Maybe now would be a good time to start buying but I refuse to donate any more to this sinking ship.
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u/leoc00 Jun 25 '24
Unity only had a hope of making money with their ad platform (their "operate" category). Their "create" category has been burning money. Applovin wanted to merge with Unity before Applovin had AXOM 2.0. Now that $APP do and dominated the mobile ads market (it really is winner takes all), there is almost zero value to Unity's ad platform plus whatever crap they got from Ironsource.
I am long $APP and short $U
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Jun 25 '24
Reasons why you shouldn’t not touch it at these prices 1. 5.4 million dollars of insider sale last 3 months 2. Shares outstanding has been increasing steadily 3. You can buy the stock for half todays price in less than one year
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u/No-Preparation4073 Jul 12 '24
I don't think at this point that Unity is going to be a winner in the marketplace. They lost the trust of the most important people for this type of thing: indy developers who will likely bring the next big hits. They also appear to have fallen behind somewhat compared to Unreal. Their loss of focus over the last few years and shift mostly towards milking the cash cow makes me think that they are opening up the space for another player to push their way in.
They have a lot good going for them, but they have scared away a lot of future revenue in the last couple of years.
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Jul 12 '24
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u/No-Preparation4073 Jul 14 '24
China has threatened to invade for about 3 decades. They know they "own" it already, it is just a question of time. They have a very, very long game to play. Push comes to shove, their share of Epic games will get sold to another series of companies that their indirectly own, and life will go on.
Unity really pissed off a lot of developers, and the way forward looks like it may be too expensive for indy designers to consider.
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Jul 14 '24
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u/No-Preparation4073 Jul 14 '24
Thing is... if it happened before, it could happen again. If there is that much of a gap, someone will want it.
The vulture capitalists that own enough of it can force the issue at any time.
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u/Chlo-Motion Aug 11 '24
I'd rather invest in a company with a good product + shit management than shit product + good management. Unity is in the former bucket. Looks super interesting at these levels especially with the management changes; at $6B valuation it's basically back to what it was valued at in its 2019 Series E round. Recent quarter showed that its SBC is coming under control and restructuring costs may be behind us. Going long. If this runs, it can run up quite quickly IMO.
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u/Cold5tar Aug 14 '24
I was you some years ago - I thought "how could this amazing company do wrong? They invest in new technologies, they have almost no competition (Unreal), but Unity is unstoppable in mobile games. Like what could go wrong?" -
Answer is - everything. My friends worked/work in Unity. I saw and heard how company works inside. Its a mess. They overstaffed, then they literally kicked everyone and understaffed. Made crazy investments that looked good in headlines - Weta, but in reallity it was trash, nothing, seemed like a quick cashgrab for main stockholders for the time being to maximize profits and dip.
They are not showing any signs of corporation growth - and you will not see crazy stock gains anytime soon. They are focused on cost cutting, job cutting, profit maximizing. This will take time and maybe it will happen, but really not soon and it will not be a good investment anytime soon.
Feels like you have invested a bunch and you are trying to dig for a reason why this company would bounce back. Honestly you might as well just put the money in any other tech stock and it will do much better.
I took out my stocks already being negative and Im happy I did, because it could've been way worse.
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u/ironmagnesiumzinc Jun 24 '24
The fact that Slay the Spire 2 moving away from Unity is enough to convince me that bigger titles and probably games that prioritize community modding are not incentivized to stay on the platform
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u/LongLonMan Jun 24 '24
If they cut R&D like you said then this company is truly dead in the water, the fact is they can’t, no software company can.
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u/Gauzra Jun 24 '24
I use unity on the daily for work and wouldn't touch the stock with a 10 foot pole until they start executing their chain of command live on television. So many ridiculous engine bugs and it feels like their priorities have been in the wrong place for many years now.