The once-high-flying tech stock Unity Software Inc. (U) has plummeted to new time lows

Following their first-quarter results announcement on May 10, U's stock price plummeted by 29% in after-hours trading. The game-development software company's sales increased 36% year over year to $320.1 million
 
WAN CHAI, Hong Kong - July 21, 2022 - PRLog -- U's net loss shrank from $27.3 million to $25.4 million, or $0.08 per share, according to non-GAAP accounting rules, which was in line with analyst's forecasts. According to GAAP, the company's net loss increased from $107.5 million to $177.6 million.

U anticipates sales to gain only 6% to 8% year over year in the second quarter, much below the average projection of 31% growth. It anticipates sales to expand from 22% to 28% for the whole year, compared to analyst's projections of 35% growth. This bleak estimate casts doubt on U's long-term ambition to increase yearly income by 30%.

On the other hand, U's stock is presently trading at a 35% discount to its IPO price and more than 80% below its all-time high. Should investors consider purchasing the stock at these low levels?

U's Create Solutions division, which houses its core game development engine and development tools for non-gaming industries, brought in 36% of revenue in the first quarter. Its Operate Solutions division, which handles advertisements, in-app purchases, analytics tools, revenue-sharing arrangements and other services for developers, brought in 57% of the company's income. The remaining 6% comes from the company's Strategic Partnerships and Other segment, which mostly engages with other gaming firms.

During a conference call, CEO John Riccitiello said the slowdown in the Operate Solutions segment was "mostly caused by internal factors in Unity monetization in an otherwise healthy market," and that the company sees "these challenges as temporary and not structural," and that they will not have an adverse impact on its growth "beyond 2022."

Riccitiello also stated that he expects Unity to "sustainably increase revenue at or over 30% per year over the long term," and that Unity's objective of attaining non-GAAP profitability by 2023 remains intact.

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