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Unity Software Climbs as Goldman Sees Potential in 3D Gaming

Unity Software is expected be a leader in the shift to 3D videogames, Goldman Sachs says, initiating coverage of the stock at buy.
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Shares of Unity Software  (U) - Get UNITY SOFTWARE, INC. Report were higher Monday after the 3D videogame development platform was the subject of a bullish initiation from analysts at Goldman Sachs. 

Goldman initiated Unity Software with a buy rating and $126 price target. Analyst Christopher Merwin said the San Francisco company "is driving a structural shift in the way that videogames are created."

The price target reflects 20% potential upside from the stock's Friday closing price. At last check Unity shares were 3.2% ahead at $109.10. 

Last week, Unity acquired VisualLive, a technology company using augmented reality to aid in architecture, engineering and construction projects. 

Unity took a hit last month after the company topped Wall Street fourth-quarter estimates while offering lackluster guidance. 

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Unity Software on Thursday reported revenue results that beat Wall Street's fourth-quarter estimates. The company also said it expected $210 million to $220 million in first-quarter revenue. Wall Street is looking for $214.7 million in revenue.

The operator of a real-time 3D development platform forecast $950 million to $970 million in revenue for 2021. Analysts on average are calling for $956.1 in revenue.

Analysts at Berenberg, who have a buy rating on Unity Software stock with a $106 price target, said that the guidance “clearly disappointed the buy-side expectations.” Investors may have thought Unity would break even on an annual free-cash-flow basis ahead of a 2022 target.

Goldman Sachs in the same note also initiated coverage of the Toronto cloud-based learning management system Docebo  (DCBO) - Get DOCEBO, INC. Report with a buy rating. The company offers "a differentiated solution in what is otherwise a mature and relatively crowded end market."

The firm placed a $57 price target on the company. Docebo shares traded on Nasdaq at last check dropped 6% to $43.32.