Unity Software (U) - Get Unity Software Inc. Report was upgraded Wednesday to buy from hold by Stifel analysts after the 3D videogame development platform reported a 41% jump in first-quarter revenue and raised its guidance.
Shares were of the San Francisco company were down nearly 1% to $83.74 in trading Wednesday.
Analyst Tom Roderick, who has a $125 price target on the shares, said in a research note that "we've heard and seen enough."
"Unity Software is already a premier real-time 3D software development gaming platform, but the company clearly has the potential to be so much more," he said.
Roderick noted that the company's shares were off 52% from December highs and said the latest results should offer "plenty of comfort that IDFA is likely to be a passing storm."
Unity Software had warned in the fourth quarter that it expected the arrival of "Apple’s iOS14’s privacy modifications on IDFA will affect the way mobile game developers acquire customers and how they optimize lifetime customer value."
Roderick said Unity's strength in mobile gaming "may ultimately be just the start."
"Today, non-gaming verticals represent slightly greater than 10% of total revenues, but we expect this segment to be a tailwind to total growth for the next several years," the analyst said.
Piper Sandler analyst Brent Breslin also said the company's results suggest "that the IDFA headwinds could be less than feared going forward."
Breslin maintained his overweight rating on the shares with a $150 price target.
"We believe the demonstrable market share captured in Gaming; and growing momentum in new 3D digital experiences beyond gaming warrants a premium valuation," he said.
Barclays analyst Mario Lu kept his equal weight rating on the company but cut his price target to $90 from $130.
Lu said that Unity is continuing to grow its Create segment and is growing adoption in verticals outside of gaming, such as construction and automotive.
"While we continue to view Unity as one of the leading innovative companies in our coverage, it is currently trading at 22x FY22 revenue," Lu said, "and therefore we would need to see a stronger inflection in these new verticals before we can become more constructive."