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11-29

Sofi

11-25

Unity will come back

Unity's Potential Turnaround, Will It Pull It Off?

11-14

8%-14% annual growth, that's not very strong

ASML Upholds 2030 Sales Forecast in Bet on AI-Driven Demand

07-31

$SoFi Technologies Inc.(SOFI)$

2022-04-08

In 5 year, nio would be delist from the US, become one of the best car manufacturers and in China. Nio is better not in US.

Where Will NIO Stock Be In 5 Years?

2022-03-15

Those 5 companies will worth a lot more the second the delist from the US.

Tesla‘s Market Cap ≈ Sum of Five Chinese Internet Giants

Go to Tiger App to see more news

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will come back","listText":"Unity will come back","text":"Unity will come back","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/374775735607552","repostId":"2486477187","repostType":2,"repost":{"id":"2486477187","kind":"highlight","pubTimestamp":1732517531,"share":"https://ttm.financial/m/news/2486477187?lang=&edition=fundamental","pubTime":"2024-11-25 14:52","market":"hk","language":"en","title":"Unity's Potential Turnaround, Will It Pull It Off?","url":"https://stock-news.laohu8.com/highlight/detail?id=2486477187","media":"seekingalpha","summary":"Unity Software is recommended as a speculative investment despite its past missteps, with new leadership aiming to revitalize the company and its offerings.The company's \"Grow\" segment, which focuses on in-game advertising, has faced significant challenges but is undergoing a fundamental rebuild to enhance ROAS.Unity's \"Create\" business has launched Unity 6 with substantial improvements and repealed unpopular runtime fees, aiming to regain developer trust and market share.The potential for Unity to emulate AppLovin's success in the in-game advertising space presents a compelling turnaround opportunity with significant upside if successful.   Kobus Louw/E+ via Getty Images  Can Unity pull off a comeback after blowing some significant opportunities?Turnarounds are not the most popular of recommendations-particularly in the IT space. I doubt if their success ratio reaches 50%. They sound good in the","content":"<html><head></head><body><ul style=\"\"><li><p>Unity Software is recommended as a speculative investment despite its past missteps, with new leadership aiming to revitalize the company and its offerings.</p></li><li><p>The company&#39;s &#34;Grow&#34; segment, which focuses on in-game advertising, has faced significant challenges but is undergoing a fundamental rebuild to enhance ROAS.</p></li><li><p>Unity&#39;s &#34;Create&#34; business has launched Unity 6 with substantial improvements and repealed unpopular runtime fees, aiming to regain developer trust and market share.</p></li><li><p>The potential for Unity to emulate AppLovin&#39;s success in the in-game advertising space presents a compelling turnaround opportunity with significant upside if successful.</p></li></ul><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/9aab87d96396829e18d4c3217e944476\" tg-width=\"750\" tg-height=\"396\"/></p><p></p><h2 id=\"id_3265277554\">Can Unity pull off a comeback after blowing some significant opportunities?</h2><p style=\"text-align: left;\">Turnarounds are not the most popular of recommendations-particularly in the IT space. I doubt if their success ratio reaches 50%. They sound good in the reading, but then something emerges from the woodwork, and they simply do not work out. That said, there have been some significant exceptions, and indeed AppLovin (APP), perhaps the most successful stock IT stock in 2024 is a significant example. And yet here I am, recommending Unity Software (NYSE:U) as an investment, or least a speculation.</p><p style=\"text-align: left;\">Unity shares have fallen by more than 17% in the last year, and they are down almost 50% in the last two years. Rally attempts have been feeble and met by selling. The shares are up by about 64% since their absolute nadir of $13.93, their closing price on 8/8/24. But after a positive earnings report in early November that drove the shares to as high as $22.86, they have fallen back by 22% before a very recent back to the post earnings report level.</p><p style=\"text-align: left;\">There are plenty of investors who won’t touch these shares and choose to exit the shares whenever an opportunity arises.</p><p style=\"text-align: left;\">The former CEO and his team made several major missteps that have brought this company, once a titan in terms of its technology in the gaming space, to a low ebb. First, the company’s ad monetization engine ran into significant technology issues on his watch. That was followed by a misbegotten and poorly executed merger with in-game advertising leader, ironSource. And finally, in an attempt to boost short-term revenue, the company, instituted a change to the pricing of its game creation software that infuriated game developers and has just recently been rescinded.</p><p style=\"text-align: left;\">As might be expected, the CEO whose miscues brought the company low, John Riccitiello, is gone now. He “retired” a bit more than a year ago. After a transitional CEO, Jim Whitehurst, who came from Silver Lake Partners, still a major investor in Unity with an 8.7% ownership stake, a new permanent CEO has been hired. Matt Bromberg started with the company in Mid-May. He had previously been the COO of Zynga, before its acquisition by Take-Two (TTWO) and previously had held leadership positions at Electronic Arts (EA). By October, Bromberg had brought in Steve Collins, a very well-known and respected game developer, as the Chief Technology Officer. In addition, a new CFO, Jarrod Yahes has been hired. He comes to the company from Shutterstock (SSTK), a company that provides a subscription service and à la carte access to stock photos that are used by a variety of customers in different industries, including the digital advertising space.</p><p style=\"text-align: left;\">All of that said, why look at Unity now at this price and this time. In the last several months, shares of AppLovin have taken off. I last recommended AppLovin shares on SA on July 5, 2024. In the last 4 months +, it has had a strong run-it has risen a bit over 280% in that span.</p><p style=\"text-align: left;\">Many subscribers have been wondering if there is another AppLovin out in cyber land. No doubt, AppLovin is going to be one of the best stocks to have owned in 2024. The shares are up no less than 653% YTD-that’s more than twice the percentage gain of Palantir (PLTR), no slouch in appreciation but trailing APP shares as the best performing IT stock in 2024. At this point, it seems like every institution that can justify owning APP shares wants to pile into the equity, which most recently has seen its RSI reach exorbitant levels.</p><p style=\"text-align: left;\">At this point, while the shares are a reasonable investment in terms of looking at the longer-term potential, the spectacular opportunity that they presented when they first introduced their version of AI, Axon 2.0 has been narrowed by the rapid appreciation of the shares.</p><p style=\"text-align: left;\">The recent success of AppLovin has been more or less entirely a factor of the success of Axon 2.0. For those unfamiliar with that product, it is an AI-powered engine whose predictive capabilities are based on machine learning that significantly improves the targeting accuracy of in-game ads. This has substantially increased the return on advertising spend (ROAS) for users and as their campaigns, based on Axon 2.0 produce positive results, they have continued to increase their Axon 2.0 investment. There is a significant virtuous cycle impact here-the greater the use of Axon 2.0, the more data is collected. More data improves the accuracy of predictions, raising the ROAS for customers, and they increase their spend on Axon 2.0. That is why AppLovin has been able to achieve such startling growth combined with extraordinary margins.</p><p style=\"text-align: left;\">Unity began its life offering a set of software tools to create sophisticated games. It was a pioneer in providing game creators with the tools they needed to create 3D games, and that was the focus of the company. It held a successful IPO in a bit more than 4 years ago. A logical evolution was the development of a set of what are called mediation tools which the game developers could use to monetize their creations.</p><p style=\"text-align: left;\">This was the foundation of Unity’s own in-game advertising product-the segment of its business that it calls “Grow.” Initially, Grow was very successful and was a leading vendor in the space, leveraging its position with Unity’s community of game creators. For a time, it was market leading and growing more rapidly than AppLovin.</p><p style=\"text-align: left;\">At the start of 2022, the efficacy of Grow’s algorithms saw an unexpected decline. It turned out that some of its algorithms had been corrupted and were not forecasting properly. In addition, the company discovered an error in its data collection technology which also crippled the efficacy of the solution. Needless to say this led to a decline in Grow revenues.</p><p style=\"text-align: left;\">In the summer of that year, Unity announced its intention to acquire an Israeli-based company called ironSource. ironSource probably had the industry-leading market share of the in-game advertising space at that time and had been growing rapidly. The merger process was attended with some drama as AppLovin, at that point, tried to merge with Unity on condition that Unity abandon its transaction to acquire ironSource.</p><p style=\"text-align: left;\">Ultimately, the AppLovin proposal was rejected and in November 2022, Unity acquired ironSource. The merger did not go well. There was a botched integration of ironSource into Unity Ads. Then the ironSource senior managers all departed Unity. Subsequently, there may have been an effort by ironSource middle managers to bully Unity staffers into resigning. ironSource and AppLovin had been existential competitors. That meant that the ironSource style was far more aggressive and clashed with Unity’s culture. I have linked here to an article that purports to provide an insight into the problems at the Unity Grow division. It is not pretty reading, and one has to be careful to try to disentangle the wheat from the chaff: fired or bullied employees are often less than objective in their evaluation. Many of the bullied or fired employees were ones who had apparently let the Unity mediation technology get stale and uncompetitive.</p><h2 id=\"id_1200816544\" style=\"text-align: left;\">Where is Unity Grow at this point?</h2><p style=\"text-align: left;\">Unity is a tale of two businesses. I have started this article looking at Grow-both because it is larger but also because it is the segment that competes with AppLovin and which perhaps has the potential to achieve some of the success that AppLovin has had with Axon 2.0.</p><p style=\"text-align: left;\">Unity Growth is actually the larger of the two revenue streams at Unity today. Last quarter its revenues were $298 million, down 5% year over year, but up by 1% sequentially Overall, Grow was 69% of total revenues. Obviously, at least some of the critique in the linked article above is a significant exaggeration, given that sequential revenues actually grew, albeit modestly. Just how much of the article represents the state of affairs within Unity Grow is difficult for me to determine as an outsider. Cultural clashes are never pretty, but are often necessary. A new management was never going to permit Grow to remain stuck in neutral.</p><p style=\"text-align: left;\">Grow revenues reached $253 million in Q4-2022. In the immediate wake of the purchase of ironSource, Grow revenues were $344 million. Overall, Grow revenues have declined about 26% over the last two years. Over the same span, AppLovin software platform revenues have risen from $306 million to $835 million, essentially a function of the performance of the Axon platform in creating superior ROAS for customers.</p><p style=\"text-align: left;\">Unity has a somewhat different vision of its go-to-market strategy for Grow when compared to AppLovin.</p><blockquote><p>Finally, we talked last quarter about embarking on a fundamental rebuild of our machine learning stack and data infrastructure designed to enhance the return on investment we’re able to deliver to our advertising customers. We’re happy to report great progress on that work, which is already in testing on live data. We’re very encouraged by the early results we’re seeing. We believe that our new data platform will not only drive performance improvements in user acquisition and monetization, but also surface insights critical to game production and live service management, where understanding consumer behavior is core to being able to build and operate great games. These investments are core to our vision of a unified platform that can deliver for our customers across the full lifecycle of game development.</p></blockquote><p style=\"text-align: left;\">This strategy comes from the playbook that has marked Unity’s vision in this space almost from the start of it creating its Grow business. As can be seen from the above quote from the company’s most recent shareholder letter, Unity sees in-game advertising as an integral component of …well, a unified strategy that goes from game creation to monetization.</p><blockquote><p>We&#39;re the only company in the world capable of providing a platform to power the entire development cycle from prototyping through live service management to user acquisition and monetization.</p></blockquote><p style=\"text-align: left;\">That is quite different from what AppLovin is currently doing; while it still has games that it has created, it does not offer game creation tools and its gaming business is a cash cow, and not really a part of its go-forward strategy.</p><p style=\"text-align: left;\">According to the company, despite the revenue decline of the Grow business, Unity’s customer base has not migrated to other in-game advertising solutions. What has happened, at least according to the management, is that because of the relative lower level of ROAS from the existing Unity platform, its users have moderated their spending for the in-game ads available on that platform, but haven’t deserted as customers either. I really have no way of validating the assertion.</p><p style=\"text-align: left;\">Like most anything else in the gestation process, evaluating the probability of success for is more of a guess than anything else. It has just been 15 months since Axon 2.0 was launched. At the time of the launch, some analysts were skeptics. I am linking here to an article which highlights some of the skepticism at that time.</p><p style=\"text-align: left;\">This is not intended to deprecate the skills of the mentioned analysts. As it happens, the Benchmark analyst mentioned in the article still has a sell rating on APP shares. The fact is, that when a product such as this is launched, many analysts will be skeptical and others will be more optimistic, and there simply will not be enough information to make much more than a guess.</p><p style=\"text-align: left;\">At the end of the day, it is all about efficacy. The buyers of ads are looking for quantifiable results. If the results are there, then there is a high probability that users will increase their investments on ad spending through the platform. I think management is very well aware of this. For the most part, developing this is a tedious and iterative process, but one that technology has made very doable over time.</p><p style=\"text-align: left;\">Management has made the assertion that because it offers both creation and monetization tools, it is in a position to offer unique insights.</p><blockquote><p>And as I said again, in in the opening statements, we think we are in a unique spot with respect to being the only company we believe in the world, that can sit as a platform through the entire lifecycle of development, from prototyping through to operating live service, and into monetization and advertising in UA. And those insights that we glean from being a platform, we can share those with our customers, and fundamentally offer insights that we think over time that no one else can. And to your point, we&#39;ve got work, to do that. But we know what the work is and its work that&#39;s doable. And we&#39;re excited about it. And we&#39;re seeing, we&#39;re seeing, and feeling the wind at our back from, from the perspective of Unity how customers are responding, and some of the early results of the investments we&#39;re making. So this is an -- it&#39;s a business that we really couldn&#39;t be more excited to be in.</p></blockquote><p style=\"text-align: left;\">It seems like a reasonable assertion, but again, at this point, it is difficult to validate. The CEO talked about the fact that game monetization is not necessarily a winner-take-all market.</p><blockquote><p>Game monetization will not be a winner to take all market. I can tell you for certain from personal experience that customers don&#39;t desire that outcome.</p></blockquote><p style=\"text-align: left;\">I think that is highly likely.</p><p style=\"text-align: left;\">The company hopes to replace its old solutions by the end of calendar Q1 or in Q2. Is a buy recommendation premature here? The opportunity to emulate some, if not all of AppLovin’s explosive growth probably will not start until the summer of next year. While I am a long-term investor, I recognize that not all readers will want to wait on that long to see any validation of a thesis. But, as it turns out, that is not necessary. The company’s other business, Create, has had some new initiatives and those initiatives have the potential to move the CAGR needle in the immediate future.</p><h2 id=\"id_753298061\" style=\"text-align: left;\">Unity’s Create business: There’s a lot new, including a 6.0 release, a pricing change, and the issue of using AI as a game development tool.</h2><p style=\"text-align: left;\">Unity’s Create Solutions revenue last quarter was $132 million, up 5% year-on-year and 2% sequentially. At this point, Create is 31% of Unity&#39;s total revenues.</p><p style=\"text-align: left;\">Unity 6 was announced for general availability last month. It should be noted that the company’s new CEO, Matt Bromberg, is an erstwhile game developer/game entrepreneur, and is apparently intimately familiar with the specifics of what features and functions creators need and crave. Some of the features will be familiar to developers and only developers. Others are universally understood. One of those is performance enhancements based on optimizations. Another is something called a GPU Resident Drawer. Overall, the company has cited a more than 2X improvement in the performance of its new offering. There are many other new features which probably resonate more with game developers than anyone else and are of less interest to many investors.</p><p style=\"text-align: left;\">At least as important as the new product itself was the repeal of run time fees. It was about a year ago when the company announced a significant pricing change by instituting runtime fee for the development of new games. This was enormously unpopular with many users and had crippled Unity’s ability to grow. It led to market share losses and immense customer dissatisfaction.</p><blockquote><p></p><p>So if you didn&#39;t want to pay the new prices, all you have to do is not upgrade. That obviously was not a great dynamic from our perspective. So in addition to the sort of relationship elements and changing fundamentally how we&#39;re talking to customers, there was also a really enormous practical impact in which, for example, at our Unite conference in Barcelona, where literally, 50 customers came up and said, hey I had said I told everybody internally no upgrade in Unity 6 and now that we&#39;ve -- you&#39;ve repealed it and you reverted to the subscription, we&#39;re a green light.</p><p>So those dynamics change real radically.</p><p>While the company did eliminate run time fees, it has instituted price increases. Typically, these increases play out over some time and they should be a significant tailwind over the course of 2025.</p></blockquote><p style=\"text-align: left;\">Another investment issue regarding Unity’s Create business has been that of genAI. Simply put, the question has been if the use of genAI can eliminate or reduce the need to use Unity, or any other set of tools, to create modern games. It is a more complex question than might be imagined. AI has been used for some time now as a part of the overall game creation process. It makes the process more efficient and speeds up the time to deliver a new game. The new CEO provided some insights into his perspectives on the issue: not terribly surprisingly it was anodyne and generic. Most likely the process of integrating genAI into the game creation process will be more incremental than existential.</p><p style=\"text-align: left;\">The CAGR estimates for game creation software overall range between 5% and 11% depending on which analysis is used. For many years, prior to the recent upsets, Unity Create had a CAGR many times that level because of its technology. The guidance this company provided on its latest call was sparse, both because of caution surrounding the cadence of a turnaround, and also because the CFO is interim, and will soon revert to a different role. Further, headline numbers still reflect the impact of Unity’s exit from non-core businesses.</p><p style=\"text-align: left;\">Revenues last quarter from the company’s core business components were $429 million. That compares to the prior forecast of $415-$420 million. The company increased full-year guidance by more than $50 million at the mid-point, suggesting some growth acceleration in its Create business in Q4. Understandably, in the midst of what is an existential product transition, it is not expecting Q4 will see any growth in its Grow business segment. Current published expectations for this current quarter are for revenues of $433 million. Published expectations for 2025 are for revenue growth of just 2%. After all that has gone on at Unity over the past couple of years, forecasts should and do err on the side of extreme caution. There are more than a few unknowns that need to be considered and evaluated in establishing forecasts for this company at this time.</p><p style=\"text-align: left;\">My own estimate for 2025 revenue is $1.92 billion, compared to the published consensus of $1.82 billion. It all depends on just how successful the turnaround is, and particularly if the Grow segment of the business can …well, start to grow itself when its new technology replaces the current flawed version being offered.</p><h2 id=\"id_4251066667\" style=\"text-align: left;\">Unity’s competition</h2><p style=\"text-align: left;\">There are many vendors offering game development software. I have linked here to the Gartner listing of competitors; it isn’t particularly useful. I have also linked to both the Reddit and the Quora threads.</p><p style=\"text-align: left;\">None of the analysis presented here is really relevant. Unity 6 is just now available, and it wasn’t available at the time these threads were compiled. And these threads were compiled prior to Unity rescinding its run time fees. Further, the appointment of a new CEO who has been a game developer and is intimately familiar with that culture and is able to understand and act on developer concerns is a factor that is likely to change the competitive calculus.</p><p style=\"text-align: left;\">Unity has lost a significant amount of user goodwill, although its market share loss, if any, is less clear. It can take time to reestablish favorable vibes in the developer community. I expect with the new products that have been introduced, coupled with a management that is likely to be perceived as developer friendly and concerned, market share gains are likely - although not all at once.</p><p style=\"text-align: left;\">With regard to Unity’s Grow segment, its competitor is AppLovin. If the technology that Unity ultimately brings to market can produce ROAS equal to or greater than that which AppLovin is currently providing its users, it will see substantial growth-far greater than anyone-and that includes this writer-is willing to currently forecast.</p><p style=\"text-align: left;\">I don’t think there is any secret as to what has to be done. As the CEO said on the recent conference call, it is an iterative process. If the integration of game creation and game monetization winds up actually producing a better ROAS, then the opportunity is enormous, and particularly so given the current intense skepticism that Unity will actually become a significant competitor to AppLovin. All things considered, it is one of the better bets available in the enterprise software space, but competing against AppLovin at this point is a high bar-although not really insurmountable.</p><h2 id=\"id_3499104257\" style=\"text-align: left;\">Unity’s Business Model-What it will be is a function of how successful its Grow initiative is.</h2><p style=\"text-align: left;\">Invariably, at this point in writing an article, I like to discuss the details of a company’s business model. That is what I am trained to do. In this case, discussing the details of the latest quarter are really not totally relevant. I am recommending Unity shares because I believe that the company’s efforts to reinvent itself have a reasonable probability of success. In particular, I think that the opportunity it has to become a realistic alternative to AppLovin within the in-game advertising space is significant and as yet under-appreciated. That is relevant because the margins that APP has achieved in that business are so substantial.</p><p style=\"text-align: left;\">Last quarter, AppLovin’s adjusted EBITDA margin in its software platform segment was 79%! The company’s overall free cash flow margin, which includes its margin on the games that it has created and published, was 45%. I do not wish to suggest that Unity will achieve these kinds of margins in the near future. But I present AppLovin’s most recent results simply to show what is possible.</p><p style=\"text-align: left;\">In this most recent quarter, Unity’s adjusted gross margin was 84%. The other cost ratios are elevated as the company will have to scale revenues to support its current infrastructure. Non-GAAP research and development expense was 29% compared to 27% in the year earlier period. Sales and marketing were 24% up by 400 bps year-on-year. Non-GAAP general and administrative expense, declined by 25% in dollars, and that was enough to hold the expense ratio steady at 10%.</p><p style=\"text-align: left;\">Overall, while the GAAP net loss margin was 28%, the company’s adjusted EBITDA margin was positive 21%. The company has been able to remain free cash flow positive. Much of its net loss has to do with its relatively substantial depreciation and amortization provision, which most recently was 24% of revenues. As capex is less than 2% of revenue, and stock-based comp. is 24% of revenues, the company, despite its current state, has been able to achieve free cash flow margin of 27%.</p><p style=\"text-align: left;\">What the business model might look like is entirely a function of how the company’s efforts to undo past errors and to develop an app monetization offering that can produce a strong level of ROAS for users evolves. Unity, like APP, has the potential to be very profitable, but it is all a function of the company’s product initiatives.</p><h2 id=\"id_1307660479\" style=\"text-align: left;\">Risks to the investment thesis.</h2><p style=\"text-align: left;\">This is a turnaround. And inherently, that makes the investment thesis risky. I don’t know the statistics-but my guess is that more turnarounds don’t achieve their full promise than those that do. There really are no secrets about the risks to this thesis.</p><p style=\"text-align: left;\">Unity has to be able to offer an in-game advertising solution that produces a very high ROAS-at least equivalent to what the ROAS has been for AppLovin’s Axon 2.0. Without the ability to offer that, the company will not be able to capture the potential growth is this, its major revenue segment.</p><p style=\"text-align: left;\">The company has rescinded its run-time charge. The issue, of course is, will the developer user community return and choose to upgrade to Unity 6.0. The price/performance advantages are there and so, too, are the functional improvements. But there are lots of customers who have become conspicuously unhappy by the aborted pricing change. Will they return as enthusiastic Unity customers? Will they upgrade? Will they accelerate their game creation efforts on the Unity platform?</p><p style=\"text-align: left;\">The gaming business has been cyclical. It saw exceptional growth during the period of the pandemic, when users reached a high point in terms of their engagement as other forms of recreation were severely circumscribed. Subsequently, as user engagement returned to more normal levels, the growth of the gaming business slowed. The overall environment has shown some improvements, but certainly should macro conditions deteriorate, this would impact Unity-it still has a 70% market share according to analysts for game creation tools.</p><p style=\"text-align: left;\">I think management chose the right individual to turn this around-at least based on his public pronouncements. He says the right things, and he is certainly on a mission to prove his ability to run a large game creation and monetization vendor. But the tasks ahead are non-trivial and require lots of execution and some luck as well. Those are the risks to the thesis.</p><h2 id=\"id_2775871599\" style=\"text-align: left;\">Wrapping up-The case to buy Unity shares now</h2><p style=\"text-align: left;\">The case to buy Unity shares is a bet on its potential turnaround. In particular, the thesis relates to the potential for Unity Grow, which has embarked on a complete revamp of its in-game advertising platform, to mimic some of the success that AppLovin has had with Axon 2.0. Management is well aware of what is needed to launch a successful offering in this space, and it is well along in terms of developing the appropriate technology for users. It is a tedious, iterative process, but it is the only way to ensure that users will get at least the level of ROAS that they are expecting.</p><p style=\"text-align: left;\">In addition, the company has rescinded the toxic run time fees that were misguidedly instituted by the prior CEO. And it has launched a new generation of its gaming engine with substantial price/performance improvements as well as significant improvement in graphics capabilities. The new CEO has a lengthy experience in the gaming industry, both as a developer and as the operator of a good-sized vendor. He seems likely to be able to restore Unity’s reputation in the space.</p><p style=\"text-align: left;\">Because this is a turn-around, precise quantification of the potential is not really possible. Whatever a prudent guess might be, it would be substantially bettered if the strategy works-and if the strategy doesn’t work, the investment won’t be saved by attractive valuation metrics-which, after all, are as much retrospective as prospective. Based on a revenue forecast that in no way reflects the potential for a turnaround, or one that starts to achieve results in 2025, my estimate of the EV/S ratio is a bit greater than 6X. But the reality is that if the turnaround works, that ratio would, perhaps, be 4X on 2026 revenues, and with a free cash flow margin that could easily top 40% as it is currently 24% without any positive impacts from new products.</p><p style=\"text-align: left;\">Over the course of writing this article, over the past week-just a few days really, Unity shares have appreciated 31%. Some of this is apparently a rumor that Microsoft might be interested in making a bid to acquire the company. I, personally, don’t quite see the logic of that transaction and whether I did or not, it would probably receive antitrust objections. I would not recommend Unity shares because of a potential merger-if it were to happen it would be lagniappe, at least for me.</p><p style=\"text-align: left;\">Also, recently, Cathy Wood’s ARK Innovation ETF sold $48 million of Unity shares after the company reported its most recent quarter.</p><p style=\"text-align: left;\">High-growth IT stocks have staged an impressive rally this week. A benchmark ETF, the IGV has rose by nearly 5% Investor seem of a “risk-on mindset. Speculating on the success of Unity’s turnaround is congruent with that mindset. I am not trying to opine here with regard to how investors should allocate portfolio resources to risk-on positions. Some readers will doubtless be concerned about the sharp rally in high-growth IT shares in the few weeks since the election. That is obviously a different subject than what I have tried to write about in this article.</p><p style=\"text-align: left;\">I believe that the risk/rewards of investing in Unity shares are quite compelling and that remains the case after the spike in valuation of the last few days. There is really room for another monetization engine in the in-games advertising space, and my belief is that Unity has a reasonable chance to be that alternative. I think the odds favor Unity shares achieving positive alpha over the next year and beyond.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Unity's Potential Turnaround, Will It Pull It Off?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nUnity's Potential Turnaround, Will It Pull It Off?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-25 14:52 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4739963-unity-u-stock-potential-turnaround-will-it-pull-it-off><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Unity Software is recommended as a speculative investment despite its past missteps, with new leadership aiming to revitalize the company and its offerings.The company's \"Grow\" segment, which focuses ...</p>\n\n<a href=\"https://seekingalpha.com/article/4739963-unity-u-stock-potential-turnaround-will-it-pull-it-off\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"LU1861559042.SGD":"日兴方舟颠覆性创新基金B SGD","BK4585":"ETF&股票定投概念","LU1861558580.USD":"日兴方舟颠覆性创新基金B","BK4588":"碎股","BK4023":"应用软件","BK4554":"元宇宙及AR概念","U":"Unity Software Inc."},"source_url":"https://seekingalpha.com/article/4739963-unity-u-stock-potential-turnaround-will-it-pull-it-off","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2486477187","content_text":"Unity Software is recommended as a speculative investment despite its past missteps, with new leadership aiming to revitalize the company and its offerings.The company's \"Grow\" segment, which focuses on in-game advertising, has faced significant challenges but is undergoing a fundamental rebuild to enhance ROAS.Unity's \"Create\" business has launched Unity 6 with substantial improvements and repealed unpopular runtime fees, aiming to regain developer trust and market share.The potential for Unity to emulate AppLovin's success in the in-game advertising space presents a compelling turnaround opportunity with significant upside if successful.Can Unity pull off a comeback after blowing some significant opportunities?Turnarounds are not the most popular of recommendations-particularly in the IT space. I doubt if their success ratio reaches 50%. They sound good in the reading, but then something emerges from the woodwork, and they simply do not work out. That said, there have been some significant exceptions, and indeed AppLovin (APP), perhaps the most successful stock IT stock in 2024 is a significant example. And yet here I am, recommending Unity Software (NYSE:U) as an investment, or least a speculation.Unity shares have fallen by more than 17% in the last year, and they are down almost 50% in the last two years. Rally attempts have been feeble and met by selling. The shares are up by about 64% since their absolute nadir of $13.93, their closing price on 8/8/24. But after a positive earnings report in early November that drove the shares to as high as $22.86, they have fallen back by 22% before a very recent back to the post earnings report level.There are plenty of investors who won’t touch these shares and choose to exit the shares whenever an opportunity arises.The former CEO and his team made several major missteps that have brought this company, once a titan in terms of its technology in the gaming space, to a low ebb. First, the company’s ad monetization engine ran into significant technology issues on his watch. That was followed by a misbegotten and poorly executed merger with in-game advertising leader, ironSource. And finally, in an attempt to boost short-term revenue, the company, instituted a change to the pricing of its game creation software that infuriated game developers and has just recently been rescinded.As might be expected, the CEO whose miscues brought the company low, John Riccitiello, is gone now. He “retired” a bit more than a year ago. After a transitional CEO, Jim Whitehurst, who came from Silver Lake Partners, still a major investor in Unity with an 8.7% ownership stake, a new permanent CEO has been hired. Matt Bromberg started with the company in Mid-May. He had previously been the COO of Zynga, before its acquisition by Take-Two (TTWO) and previously had held leadership positions at Electronic Arts (EA). By October, Bromberg had brought in Steve Collins, a very well-known and respected game developer, as the Chief Technology Officer. In addition, a new CFO, Jarrod Yahes has been hired. He comes to the company from Shutterstock (SSTK), a company that provides a subscription service and à la carte access to stock photos that are used by a variety of customers in different industries, including the digital advertising space.All of that said, why look at Unity now at this price and this time. In the last several months, shares of AppLovin have taken off. I last recommended AppLovin shares on SA on July 5, 2024. In the last 4 months +, it has had a strong run-it has risen a bit over 280% in that span.Many subscribers have been wondering if there is another AppLovin out in cyber land. No doubt, AppLovin is going to be one of the best stocks to have owned in 2024. The shares are up no less than 653% YTD-that’s more than twice the percentage gain of Palantir (PLTR), no slouch in appreciation but trailing APP shares as the best performing IT stock in 2024. At this point, it seems like every institution that can justify owning APP shares wants to pile into the equity, which most recently has seen its RSI reach exorbitant levels.At this point, while the shares are a reasonable investment in terms of looking at the longer-term potential, the spectacular opportunity that they presented when they first introduced their version of AI, Axon 2.0 has been narrowed by the rapid appreciation of the shares.The recent success of AppLovin has been more or less entirely a factor of the success of Axon 2.0. For those unfamiliar with that product, it is an AI-powered engine whose predictive capabilities are based on machine learning that significantly improves the targeting accuracy of in-game ads. This has substantially increased the return on advertising spend (ROAS) for users and as their campaigns, based on Axon 2.0 produce positive results, they have continued to increase their Axon 2.0 investment. There is a significant virtuous cycle impact here-the greater the use of Axon 2.0, the more data is collected. More data improves the accuracy of predictions, raising the ROAS for customers, and they increase their spend on Axon 2.0. That is why AppLovin has been able to achieve such startling growth combined with extraordinary margins.Unity began its life offering a set of software tools to create sophisticated games. It was a pioneer in providing game creators with the tools they needed to create 3D games, and that was the focus of the company. It held a successful IPO in a bit more than 4 years ago. A logical evolution was the development of a set of what are called mediation tools which the game developers could use to monetize their creations.This was the foundation of Unity’s own in-game advertising product-the segment of its business that it calls “Grow.” Initially, Grow was very successful and was a leading vendor in the space, leveraging its position with Unity’s community of game creators. For a time, it was market leading and growing more rapidly than AppLovin.At the start of 2022, the efficacy of Grow’s algorithms saw an unexpected decline. It turned out that some of its algorithms had been corrupted and were not forecasting properly. In addition, the company discovered an error in its data collection technology which also crippled the efficacy of the solution. Needless to say this led to a decline in Grow revenues.In the summer of that year, Unity announced its intention to acquire an Israeli-based company called ironSource. ironSource probably had the industry-leading market share of the in-game advertising space at that time and had been growing rapidly. The merger process was attended with some drama as AppLovin, at that point, tried to merge with Unity on condition that Unity abandon its transaction to acquire ironSource.Ultimately, the AppLovin proposal was rejected and in November 2022, Unity acquired ironSource. The merger did not go well. There was a botched integration of ironSource into Unity Ads. Then the ironSource senior managers all departed Unity. Subsequently, there may have been an effort by ironSource middle managers to bully Unity staffers into resigning. ironSource and AppLovin had been existential competitors. That meant that the ironSource style was far more aggressive and clashed with Unity’s culture. I have linked here to an article that purports to provide an insight into the problems at the Unity Grow division. It is not pretty reading, and one has to be careful to try to disentangle the wheat from the chaff: fired or bullied employees are often less than objective in their evaluation. Many of the bullied or fired employees were ones who had apparently let the Unity mediation technology get stale and uncompetitive.Where is Unity Grow at this point?Unity is a tale of two businesses. I have started this article looking at Grow-both because it is larger but also because it is the segment that competes with AppLovin and which perhaps has the potential to achieve some of the success that AppLovin has had with Axon 2.0.Unity Growth is actually the larger of the two revenue streams at Unity today. Last quarter its revenues were $298 million, down 5% year over year, but up by 1% sequentially Overall, Grow was 69% of total revenues. Obviously, at least some of the critique in the linked article above is a significant exaggeration, given that sequential revenues actually grew, albeit modestly. Just how much of the article represents the state of affairs within Unity Grow is difficult for me to determine as an outsider. Cultural clashes are never pretty, but are often necessary. A new management was never going to permit Grow to remain stuck in neutral.Grow revenues reached $253 million in Q4-2022. In the immediate wake of the purchase of ironSource, Grow revenues were $344 million. Overall, Grow revenues have declined about 26% over the last two years. Over the same span, AppLovin software platform revenues have risen from $306 million to $835 million, essentially a function of the performance of the Axon platform in creating superior ROAS for customers.Unity has a somewhat different vision of its go-to-market strategy for Grow when compared to AppLovin.Finally, we talked last quarter about embarking on a fundamental rebuild of our machine learning stack and data infrastructure designed to enhance the return on investment we’re able to deliver to our advertising customers. We’re happy to report great progress on that work, which is already in testing on live data. We’re very encouraged by the early results we’re seeing. We believe that our new data platform will not only drive performance improvements in user acquisition and monetization, but also surface insights critical to game production and live service management, where understanding consumer behavior is core to being able to build and operate great games. These investments are core to our vision of a unified platform that can deliver for our customers across the full lifecycle of game development.This strategy comes from the playbook that has marked Unity’s vision in this space almost from the start of it creating its Grow business. As can be seen from the above quote from the company’s most recent shareholder letter, Unity sees in-game advertising as an integral component of …well, a unified strategy that goes from game creation to monetization.We're the only company in the world capable of providing a platform to power the entire development cycle from prototyping through live service management to user acquisition and monetization.That is quite different from what AppLovin is currently doing; while it still has games that it has created, it does not offer game creation tools and its gaming business is a cash cow, and not really a part of its go-forward strategy.According to the company, despite the revenue decline of the Grow business, Unity’s customer base has not migrated to other in-game advertising solutions. What has happened, at least according to the management, is that because of the relative lower level of ROAS from the existing Unity platform, its users have moderated their spending for the in-game ads available on that platform, but haven’t deserted as customers either. I really have no way of validating the assertion.Like most anything else in the gestation process, evaluating the probability of success for is more of a guess than anything else. It has just been 15 months since Axon 2.0 was launched. At the time of the launch, some analysts were skeptics. I am linking here to an article which highlights some of the skepticism at that time.This is not intended to deprecate the skills of the mentioned analysts. As it happens, the Benchmark analyst mentioned in the article still has a sell rating on APP shares. The fact is, that when a product such as this is launched, many analysts will be skeptical and others will be more optimistic, and there simply will not be enough information to make much more than a guess.At the end of the day, it is all about efficacy. The buyers of ads are looking for quantifiable results. If the results are there, then there is a high probability that users will increase their investments on ad spending through the platform. I think management is very well aware of this. For the most part, developing this is a tedious and iterative process, but one that technology has made very doable over time.Management has made the assertion that because it offers both creation and monetization tools, it is in a position to offer unique insights.And as I said again, in in the opening statements, we think we are in a unique spot with respect to being the only company we believe in the world, that can sit as a platform through the entire lifecycle of development, from prototyping through to operating live service, and into monetization and advertising in UA. And those insights that we glean from being a platform, we can share those with our customers, and fundamentally offer insights that we think over time that no one else can. And to your point, we've got work, to do that. But we know what the work is and its work that's doable. And we're excited about it. And we're seeing, we're seeing, and feeling the wind at our back from, from the perspective of Unity how customers are responding, and some of the early results of the investments we're making. So this is an -- it's a business that we really couldn't be more excited to be in.It seems like a reasonable assertion, but again, at this point, it is difficult to validate. The CEO talked about the fact that game monetization is not necessarily a winner-take-all market.Game monetization will not be a winner to take all market. I can tell you for certain from personal experience that customers don't desire that outcome.I think that is highly likely.The company hopes to replace its old solutions by the end of calendar Q1 or in Q2. Is a buy recommendation premature here? The opportunity to emulate some, if not all of AppLovin’s explosive growth probably will not start until the summer of next year. While I am a long-term investor, I recognize that not all readers will want to wait on that long to see any validation of a thesis. But, as it turns out, that is not necessary. The company’s other business, Create, has had some new initiatives and those initiatives have the potential to move the CAGR needle in the immediate future.Unity’s Create business: There’s a lot new, including a 6.0 release, a pricing change, and the issue of using AI as a game development tool.Unity’s Create Solutions revenue last quarter was $132 million, up 5% year-on-year and 2% sequentially. At this point, Create is 31% of Unity's total revenues.Unity 6 was announced for general availability last month. It should be noted that the company’s new CEO, Matt Bromberg, is an erstwhile game developer/game entrepreneur, and is apparently intimately familiar with the specifics of what features and functions creators need and crave. Some of the features will be familiar to developers and only developers. Others are universally understood. One of those is performance enhancements based on optimizations. Another is something called a GPU Resident Drawer. Overall, the company has cited a more than 2X improvement in the performance of its new offering. There are many other new features which probably resonate more with game developers than anyone else and are of less interest to many investors.At least as important as the new product itself was the repeal of run time fees. It was about a year ago when the company announced a significant pricing change by instituting runtime fee for the development of new games. This was enormously unpopular with many users and had crippled Unity’s ability to grow. It led to market share losses and immense customer dissatisfaction.So if you didn't want to pay the new prices, all you have to do is not upgrade. That obviously was not a great dynamic from our perspective. So in addition to the sort of relationship elements and changing fundamentally how we're talking to customers, there was also a really enormous practical impact in which, for example, at our Unite conference in Barcelona, where literally, 50 customers came up and said, hey I had said I told everybody internally no upgrade in Unity 6 and now that we've -- you've repealed it and you reverted to the subscription, we're a green light.So those dynamics change real radically.While the company did eliminate run time fees, it has instituted price increases. Typically, these increases play out over some time and they should be a significant tailwind over the course of 2025.Another investment issue regarding Unity’s Create business has been that of genAI. Simply put, the question has been if the use of genAI can eliminate or reduce the need to use Unity, or any other set of tools, to create modern games. It is a more complex question than might be imagined. AI has been used for some time now as a part of the overall game creation process. It makes the process more efficient and speeds up the time to deliver a new game. The new CEO provided some insights into his perspectives on the issue: not terribly surprisingly it was anodyne and generic. Most likely the process of integrating genAI into the game creation process will be more incremental than existential.The CAGR estimates for game creation software overall range between 5% and 11% depending on which analysis is used. For many years, prior to the recent upsets, Unity Create had a CAGR many times that level because of its technology. The guidance this company provided on its latest call was sparse, both because of caution surrounding the cadence of a turnaround, and also because the CFO is interim, and will soon revert to a different role. Further, headline numbers still reflect the impact of Unity’s exit from non-core businesses.Revenues last quarter from the company’s core business components were $429 million. That compares to the prior forecast of $415-$420 million. The company increased full-year guidance by more than $50 million at the mid-point, suggesting some growth acceleration in its Create business in Q4. Understandably, in the midst of what is an existential product transition, it is not expecting Q4 will see any growth in its Grow business segment. Current published expectations for this current quarter are for revenues of $433 million. Published expectations for 2025 are for revenue growth of just 2%. After all that has gone on at Unity over the past couple of years, forecasts should and do err on the side of extreme caution. There are more than a few unknowns that need to be considered and evaluated in establishing forecasts for this company at this time.My own estimate for 2025 revenue is $1.92 billion, compared to the published consensus of $1.82 billion. It all depends on just how successful the turnaround is, and particularly if the Grow segment of the business can …well, start to grow itself when its new technology replaces the current flawed version being offered.Unity’s competitionThere are many vendors offering game development software. I have linked here to the Gartner listing of competitors; it isn’t particularly useful. I have also linked to both the Reddit and the Quora threads.None of the analysis presented here is really relevant. Unity 6 is just now available, and it wasn’t available at the time these threads were compiled. And these threads were compiled prior to Unity rescinding its run time fees. Further, the appointment of a new CEO who has been a game developer and is intimately familiar with that culture and is able to understand and act on developer concerns is a factor that is likely to change the competitive calculus.Unity has lost a significant amount of user goodwill, although its market share loss, if any, is less clear. It can take time to reestablish favorable vibes in the developer community. I expect with the new products that have been introduced, coupled with a management that is likely to be perceived as developer friendly and concerned, market share gains are likely - although not all at once.With regard to Unity’s Grow segment, its competitor is AppLovin. If the technology that Unity ultimately brings to market can produce ROAS equal to or greater than that which AppLovin is currently providing its users, it will see substantial growth-far greater than anyone-and that includes this writer-is willing to currently forecast.I don’t think there is any secret as to what has to be done. As the CEO said on the recent conference call, it is an iterative process. If the integration of game creation and game monetization winds up actually producing a better ROAS, then the opportunity is enormous, and particularly so given the current intense skepticism that Unity will actually become a significant competitor to AppLovin. All things considered, it is one of the better bets available in the enterprise software space, but competing against AppLovin at this point is a high bar-although not really insurmountable.Unity’s Business Model-What it will be is a function of how successful its Grow initiative is.Invariably, at this point in writing an article, I like to discuss the details of a company’s business model. That is what I am trained to do. In this case, discussing the details of the latest quarter are really not totally relevant. I am recommending Unity shares because I believe that the company’s efforts to reinvent itself have a reasonable probability of success. In particular, I think that the opportunity it has to become a realistic alternative to AppLovin within the in-game advertising space is significant and as yet under-appreciated. That is relevant because the margins that APP has achieved in that business are so substantial.Last quarter, AppLovin’s adjusted EBITDA margin in its software platform segment was 79%! The company’s overall free cash flow margin, which includes its margin on the games that it has created and published, was 45%. I do not wish to suggest that Unity will achieve these kinds of margins in the near future. But I present AppLovin’s most recent results simply to show what is possible.In this most recent quarter, Unity’s adjusted gross margin was 84%. The other cost ratios are elevated as the company will have to scale revenues to support its current infrastructure. Non-GAAP research and development expense was 29% compared to 27% in the year earlier period. Sales and marketing were 24% up by 400 bps year-on-year. Non-GAAP general and administrative expense, declined by 25% in dollars, and that was enough to hold the expense ratio steady at 10%.Overall, while the GAAP net loss margin was 28%, the company’s adjusted EBITDA margin was positive 21%. The company has been able to remain free cash flow positive. Much of its net loss has to do with its relatively substantial depreciation and amortization provision, which most recently was 24% of revenues. As capex is less than 2% of revenue, and stock-based comp. is 24% of revenues, the company, despite its current state, has been able to achieve free cash flow margin of 27%.What the business model might look like is entirely a function of how the company’s efforts to undo past errors and to develop an app monetization offering that can produce a strong level of ROAS for users evolves. Unity, like APP, has the potential to be very profitable, but it is all a function of the company’s product initiatives.Risks to the investment thesis.This is a turnaround. And inherently, that makes the investment thesis risky. I don’t know the statistics-but my guess is that more turnarounds don’t achieve their full promise than those that do. There really are no secrets about the risks to this thesis.Unity has to be able to offer an in-game advertising solution that produces a very high ROAS-at least equivalent to what the ROAS has been for AppLovin’s Axon 2.0. Without the ability to offer that, the company will not be able to capture the potential growth is this, its major revenue segment.The company has rescinded its run-time charge. The issue, of course is, will the developer user community return and choose to upgrade to Unity 6.0. The price/performance advantages are there and so, too, are the functional improvements. But there are lots of customers who have become conspicuously unhappy by the aborted pricing change. Will they return as enthusiastic Unity customers? Will they upgrade? Will they accelerate their game creation efforts on the Unity platform?The gaming business has been cyclical. It saw exceptional growth during the period of the pandemic, when users reached a high point in terms of their engagement as other forms of recreation were severely circumscribed. Subsequently, as user engagement returned to more normal levels, the growth of the gaming business slowed. The overall environment has shown some improvements, but certainly should macro conditions deteriorate, this would impact Unity-it still has a 70% market share according to analysts for game creation tools.I think management chose the right individual to turn this around-at least based on his public pronouncements. He says the right things, and he is certainly on a mission to prove his ability to run a large game creation and monetization vendor. But the tasks ahead are non-trivial and require lots of execution and some luck as well. Those are the risks to the thesis.Wrapping up-The case to buy Unity shares nowThe case to buy Unity shares is a bet on its potential turnaround. In particular, the thesis relates to the potential for Unity Grow, which has embarked on a complete revamp of its in-game advertising platform, to mimic some of the success that AppLovin has had with Axon 2.0. Management is well aware of what is needed to launch a successful offering in this space, and it is well along in terms of developing the appropriate technology for users. It is a tedious, iterative process, but it is the only way to ensure that users will get at least the level of ROAS that they are expecting.In addition, the company has rescinded the toxic run time fees that were misguidedly instituted by the prior CEO. And it has launched a new generation of its gaming engine with substantial price/performance improvements as well as significant improvement in graphics capabilities. The new CEO has a lengthy experience in the gaming industry, both as a developer and as the operator of a good-sized vendor. He seems likely to be able to restore Unity’s reputation in the space.Because this is a turn-around, precise quantification of the potential is not really possible. Whatever a prudent guess might be, it would be substantially bettered if the strategy works-and if the strategy doesn’t work, the investment won’t be saved by attractive valuation metrics-which, after all, are as much retrospective as prospective. Based on a revenue forecast that in no way reflects the potential for a turnaround, or one that starts to achieve results in 2025, my estimate of the EV/S ratio is a bit greater than 6X. But the reality is that if the turnaround works, that ratio would, perhaps, be 4X on 2026 revenues, and with a free cash flow margin that could easily top 40% as it is currently 24% without any positive impacts from new products.Over the course of writing this article, over the past week-just a few days really, Unity shares have appreciated 31%. Some of this is apparently a rumor that Microsoft might be interested in making a bid to acquire the company. I, personally, don’t quite see the logic of that transaction and whether I did or not, it would probably receive antitrust objections. I would not recommend Unity shares because of a potential merger-if it were to happen it would be lagniappe, at least for me.Also, recently, Cathy Wood’s ARK Innovation ETF sold $48 million of Unity shares after the company reported its most recent quarter.High-growth IT stocks have staged an impressive rally this week. A benchmark ETF, the IGV has rose by nearly 5% Investor seem of a “risk-on mindset. Speculating on the success of Unity’s turnaround is congruent with that mindset. I am not trying to opine here with regard to how investors should allocate portfolio resources to risk-on positions. Some readers will doubtless be concerned about the sharp rally in high-growth IT shares in the few weeks since the election. That is obviously a different subject than what I have tried to write about in this article.I believe that the risk/rewards of investing in Unity shares are quite compelling and that remains the case after the spike in valuation of the last few days. There is really room for another monetization engine in the in-games advertising space, and my belief is that Unity has a reasonable chance to be that alternative. I think the odds favor Unity shares achieving positive alpha over the next year and beyond.","news_type":1},"isVote":1,"tweetType":1,"viewCount":11,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":370881407692880,"gmtCreate":1731565389452,"gmtModify":1731565722052,"author":{"id":"3569390203482079","authorId":"3569390203482079","name":"pufferfish","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":1,"crmLevelSwitch":0,"followedFlag":false,"authorIdStr":"3569390203482079","idStr":"3569390203482079"},"themes":[],"htmlText":"8%-14% annual growth, that's not very strong&nbsp;","listText":"8%-14% annual growth, that's not very strong&nbsp;","text":"8%-14% annual growth, that's not very strong","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/370881407692880","repostId":"2483819621","repostType":2,"repost":{"id":"2483819621","kind":"live","pubTimestamp":1731564426,"share":"https://ttm.financial/m/news/2483819621?lang=&edition=fundamental","pubTime":"2024-11-14 14:07","market":"us","language":"en","title":"ASML Upholds 2030 Sales Forecast in Bet on AI-Driven Demand","url":"https://stock-news.laohu8.com/highlight/detail?id=2483819621","media":"Bloomberg","summary":"ASML Holding, the Dutch maker of advanced chip-making machines that are critical to the world’s supp","content":"<html><head></head><body><p><a href=\"https://laohu8.com/S/ASML\">ASML Holding</a>, the Dutch maker of advanced chip-making machines that are critical to the world’s supply chains, reaffirmed its bullish long-term revenue outlook as it bets on an artificial intelligence-driven boom in semiconductor demand.</p><p>The Dutch firm projected that sales in 2030 will range from €44 billion ($46 billion) to €60 billion, in line with its previous forecast, according to a statement issued as part of the company’s investor day on Thursday.</p><p>ASML is the only company in the world that makes the kind of lithography machines that help semiconductor companies in turn produce the advanced chips powering everything from Apple Inc.’s smartphones to Nvidia Corp.’s AI accelerators. As such, it is often viewed as a bellwether for the broader industry and an early indicator of global semiconductor demand.</p><p>“We confirm our capital allocation strategy, and expect to continue to return significant amounts of cash to our shareholders through a combination of growing dividends and share buybacks,” ASML Chief Financial Officer Roger Dassen said in the statement.</p><p style=\"text-align: start;\">The company forecast a gross margin of between approximately 56% and 60% in 2030.</p><p>ASML’s order intake significantly missed analysts’ estimates in the third quarter, sparking a selloff in its shares and those of other chip-related businesses. The company also cut its sales outlook for next year. Chipmakers such as Nvidia have enjoyed a boom in demand for their AI chips. But sales to other key buyers, including automakers and mobile phone and PC manufacturers, have remained mired in a prolonged slump.</p><p style=\"text-align: start;\">ASML shares are down 7.9% this year.</p><p style=\"text-align: start;\">Also weighing on ASML’s prospects is the US government’s ongoing effort to limit China’s rise in the semiconductor sector, through repeated rounds of export controls that have targeted the sale of advanced artificial intelligence chips and chipmaking equipment. The Dutch government has struggled to find a middle ground between its US ally and ASML’s biggest market.</p><p style=\"text-align: start;\">Due to the US pressure, ASML has never been able to sell its cutting-edge extreme ultraviolet lithography machines to the Asian nation and was restricted from shipping its second most-advanced tools from this year.</p><p>China accounted for €2.79 billion of sales in the third quarter, nearly half of ASML’s total. The company expects China sales to account for about 20% of total revenue next year. ASML expects pressure will grow from the US to further restrict sales of semiconductor technology to China, Fouquet said in an interview with Bloomberg in October.</p><p style=\"text-align: start;\">Fouquet, who took the helm at ASML in April, told investors in October that he expects a slow chip market recovery to extend “well into 2025.” Still, next year and 2026 will be growth years for the industry and ASML overall, he said.</p></body></html>","source":"lsy1584095487587","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>ASML Upholds 2030 Sales Forecast in Bet on AI-Driven Demand</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nASML Upholds 2030 Sales Forecast in Bet on AI-Driven Demand\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-14 14:07 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.bloomberg.com/news/articles/2024-11-14/asml-upholds-2030-sales-forecast-in-bet-on-ai-driven-demand><strong>Bloomberg</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>ASML Holding, the Dutch maker of advanced chip-making machines that are critical to the world’s supply chains, reaffirmed its bullish long-term revenue outlook as it bets on an artificial intelligence...</p>\n\n<a href=\"https://www.bloomberg.com/news/articles/2024-11-14/asml-upholds-2030-sales-forecast-in-bet-on-ai-driven-demand\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"ASML":"阿斯麦"},"source_url":"https://www.bloomberg.com/news/articles/2024-11-14/asml-upholds-2030-sales-forecast-in-bet-on-ai-driven-demand","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"2483819621","content_text":"ASML Holding, the Dutch maker of advanced chip-making machines that are critical to the world’s supply chains, reaffirmed its bullish long-term revenue outlook as it bets on an artificial intelligence-driven boom in semiconductor demand.The Dutch firm projected that sales in 2030 will range from €44 billion ($46 billion) to €60 billion, in line with its previous forecast, according to a statement issued as part of the company’s investor day on Thursday.ASML is the only company in the world that makes the kind of lithography machines that help semiconductor companies in turn produce the advanced chips powering everything from Apple Inc.’s smartphones to Nvidia Corp.’s AI accelerators. As such, it is often viewed as a bellwether for the broader industry and an early indicator of global semiconductor demand.“We confirm our capital allocation strategy, and expect to continue to return significant amounts of cash to our shareholders through a combination of growing dividends and share buybacks,” ASML Chief Financial Officer Roger Dassen said in the statement.The company forecast a gross margin of between approximately 56% and 60% in 2030.ASML’s order intake significantly missed analysts’ estimates in the third quarter, sparking a selloff in its shares and those of other chip-related businesses. The company also cut its sales outlook for next year. Chipmakers such as Nvidia have enjoyed a boom in demand for their AI chips. But sales to other key buyers, including automakers and mobile phone and PC manufacturers, have remained mired in a prolonged slump.ASML shares are down 7.9% this year.Also weighing on ASML’s prospects is the US government’s ongoing effort to limit China’s rise in the semiconductor sector, through repeated rounds of export controls that have targeted the sale of advanced artificial intelligence chips and chipmaking equipment. The Dutch government has struggled to find a middle ground between its US ally and ASML’s biggest market.Due to the US pressure, ASML has never been able to sell its cutting-edge extreme ultraviolet lithography machines to the Asian nation and was restricted from shipping its second most-advanced tools from this year.China accounted for €2.79 billion of sales in the third quarter, nearly half of ASML’s total. The company expects China sales to account for about 20% of total revenue next year. ASML expects pressure will grow from the US to further restrict sales of semiconductor technology to China, Fouquet said in an interview with Bloomberg in October.Fouquet, who took the helm at ASML in April, told investors in October that he expects a slow chip market recovery to extend “well into 2025.” Still, next year and 2026 will be growth years for the industry and ASML overall, he said.","news_type":1},"isVote":1,"tweetType":1,"viewCount":42,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":333346337390752,"gmtCreate":1722411451103,"gmtModify":1722412070829,"author":{"id":"3569390203482079","authorId":"3569390203482079","name":"pufferfish","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":1,"crmLevelSwitch":0,"followedFlag":false,"authorIdStr":"3569390203482079","idStr":"3569390203482079"},"themes":[],"htmlText":"<a href=\"https://ttm.financial/S/SOFI\">$SoFi Technologies Inc.(SOFI)$ </a>&nbsp;","listText":"<a href=\"https://ttm.financial/S/SOFI\">$SoFi Technologies Inc.(SOFI)$ </a>&nbsp;","text":"$SoFi Technologies Inc.(SOFI)$","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/333346337390752","isVote":1,"tweetType":1,"viewCount":153,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":9015071870,"gmtCreate":1649400467909,"gmtModify":1676534506209,"author":{"id":"3569390203482079","authorId":"3569390203482079","name":"pufferfish","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":1,"crmLevelSwitch":0,"followedFlag":false,"authorIdStr":"3569390203482079","idStr":"3569390203482079"},"themes":[],"htmlText":"In 5 year, nio would be delist from the US, become one of the best car manufacturers and in China. Nio is better not in US.","listText":"In 5 year, nio would be delist from the US, become one of the best car manufacturers and in China. Nio is better not in US.","text":"In 5 year, nio would be delist from the US, become one of the best car manufacturers and in China. Nio is better not in US.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9015071870","repostId":"1110987574","repostType":2,"repost":{"id":"1110987574","kind":"news","pubTimestamp":1649379724,"share":"https://ttm.financial/m/news/1110987574?lang=&edition=fundamental","pubTime":"2022-04-08 09:02","market":"us","language":"en","title":"Where Will NIO Stock Be In 5 Years?","url":"https://stock-news.laohu8.com/highlight/detail?id=1110987574","media":"Seeking Alpha","summary":"SummaryI have a mixed view of NIO, following a review of its recent key metrics, namely revenue, veh","content":"<html><head></head><body><p>Summary</p><ul><li>I have a mixed view of NIO, following a review of its recent key metrics, namely revenue, vehicle gross margin and deliveries.</li><li>NIO is expected to scale up and turn profitable within the next five years, but this is dependent on the company growing sales by successfully penetrating the mass market.</li><li>I have a Hold investment rating for NIO after analyzing the key valuation and financial metrics for the company and its peers.</li></ul><p>Elevator Pitch</p><p>I assign a Hold rating to NIO Inc.&#39;s (NYSE:NIO) shares.</p><p>In five years&#39; time, Chinese electric vehicle or EV maker NIO will be larger in size (revenue base) and witness an improvement in its profitability (gross margin expansion and becoming profitable at the net profit level). But slower-than-expected top line growth and a delay in the company&#39;s path to profitability (net profit level) in the years ahead are the key downside risks, assuming that it is less successful in mass-market penetration than what investors would expect. NIO&#39;s valuations have become more reasonable (single-digit EV-to-Revenue) following the correction in its stock price, but the stock is still more expensive than its Chinese EV peers. Considering the above-mentioned factors, I have a Hold investment rating for NIO, instead of a Buy or Sell.</p><p>NIO Stock Key Metrics</p><p>There are three key metrics for NIO that investors should focus on, namely revenue, vehicle gross margin, and deliveries.</p><p>As per itsQ4 2021 financial results press release, NIO&#39;s top line increased by +49% YoY from RMB6,641 million in the fourth quarter of 2020 to RMB9,901 million in the most recent quarter. The company&#39;s Q4 2021 revenue was largely in line with market expectations, as it exceeded the market consensus&#39; sales forecast by+1.5%.</p><p>On the flip side, NIO&#39;s revenue only grew by a marginal +1% on a QoQ basis in the fourth quarter of last year. As a comparison, revenue for its peers, XPeng Inc. (XPEV) and Li Auto Inc. (LI), expanded by +50% QoQ and +36% QoQ, respectively in local currency terms in Q4 2021. On a YoY basis, XPEV and LI&#39;s revenue growth rates were also relatively faster at +200% and +156%, respectively in the recent quarter. As NIO didn&#39;t launch any new models last year, its top line expansion has trailed its key Chinese EV peers.</p><p>In terms of profitability, NIO disclosed at its recent quarterly earnings briefing that its vehicle gross margin improved by +280 basis points QoQ and +360 basis points YoY to 20.9% in Q4 2021. The company attributed the gross margin improvement in the recent quarter to the growth in &#34;revenue per vehicle&#34; and cost savings brought about using a different battery, specifically the &#34;75kWh LFP NCM hybrid battery.&#34;</p><p>However, NIO has guided for a relatively lower vehicle gross margin in the 18%-20% range for full-year 2022. In contrast, NIO&#39;s full-year FY 2021 vehicle gross margin was 20.1%. The weaker vehicle gross margin guidance for this year is largely due to expectations of higher raw material costs which will be a drag on the company&#39;s FY 2022 profitability.</p><p>Separately, NIOannouncedthe company&#39;s Q1 2022 vehicle deliveries at the beginning of April. NIO&#39;s deliveries in the first quarter of this amounting to 25,768 units were equivalent to a +29% YoY increase and represented a new historical high. But the company&#39;s Q1 2022 vehicle deliveries only increased by a modest +3% on a QoQ basis. NIO has plans in place to launch three new models (ET7, ET5 and ES7) in 2022, and the first model, ET7, was only delivered in late-March 2022. NIO&#39;s first-quarter deliveries are still growing slowly, as the Q1 2022 numbers have not reflected the growth from new model launches yet.</p><p>In conclusion, NIO&#39;s key metrics show a mixed picture for the company. This might explain why the company&#39;s share price performance has been lackluster following its recent quarterly results announcement on March 24, 2022 after trading hours. NIO&#39;s stock price has declined slightly by -1.4% from $21.98 as of March 24, 2022 to $21.68 as of April 6, 2022.</p><p>Is NIO Expected To Grow?</p><p>In the short term, NIO is still expected to grow in 2022 albeit at a slower pace as compared to 2021.</p><p>As per the chart below, the sell-side analysts have been cutting NIO&#39;s top line forecasts for 1H 2022, after the company reported Q1 2022 deliveries and Q4 2021 results. The analysts also expect some of the company&#39;s revenue to be deferred to the second half of the year, as seen with the increase in consensus sales forecasts for Q3 2022 and Q4 2022.</p><p><b>Revisions To Consensus Quarterly Revenue Estimates For NIO</b></p><p><img src=\"https://static.tigerbbs.com/36e1836925eb39412f9c301dc396551d\" tg-width=\"640\" tg-height=\"96\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/></p><p>Seeking Alpha</p><p>On a full-year basis, the market consensus sees NIO&#39;s revenue growth slowing from +108% in fiscal 2020 and +122% in FY 2021 to +75% in FY 2022, as per<i>S&amp;P Capital IQ</i> data. There are a number of factors that account for NIO&#39;s slower top line expansion this year. All the players in the global automotive industry are expected to be negatively impacted by supply chain disruptions and semiconductor shortage issues, and NIO is no exception. Furthermore, apart from the ET7 starting deliveries in late-March, the company&#39;s other two models, ET5 and ES7, are only scheduled to commence deliveries in September 2022 and Q3 2022, respectively as per management comments at the recent Q4 earnings call. As such, it is natural that deliveries and revenue are weighted towards the second half of the year, which explains NIO&#39;s modest revenue growth on a full-year basis for 2022.</p><p>Separately, COVID-19 lockdowns in parts of China could also pose downside risks to production and deliveries for NIO and its Chinese EV peers, as highlighted in this March 31, 2022 <i>Seeking Alpha News</i> article.</p><p>With regards to profitability, I noted in the prior section of this article that NIO&#39;s vehicle gross margin guidance (declining from 20.1% in fiscal 2021 to 19.0% in fiscal 2022 as per mid-point of guidance) points to relatively weaker profitability for the company this year due to raw material cost pressure. Similarly, the sell-side&#39;s consensus numbers suggest that NIO&#39;s headline gross profit margin (as opposed to non-GAAP vehicle gross margin metric) will similarly contract from 18.9% in FY 2021 to 18.0% in FY 2022 as per financial data sourced from <i>S&amp;P Capital IQ</i>.</p><p>NIO&#39;s shares are down by-32%year-to-date in 2022, and this reflects the company&#39;s slower top line growth and weaker profitability expectations this year to some extent.</p><p>Where Will NIO Stock Be In 5 Years?</p><p>In the next couple of years, NIO is expected to scale up to profitability, and this is the key medium-term re-rating catalyst for the stock.</p><p>At the company&#39;s Q4 2021 investor call, NIO noted that it expects to &#34;achieve breakeven or reach profitability in 2024 for the full year.&#34; This is in line with the consensus sell-side forecasts as per<i>S&amp;P Capital IQ</i>.</p><p>Sell-side analysts see NIO growing the company&#39;s revenue by a +51% CAGR from RMB36 billion in fiscal 2021 to RMB187 billion in FY 2025. NIO&#39;s headline reported gross margin is forecasted to expand from 18.9% to 22.4% over the same period, thanks to economies of scale. Financial forecasts for 2026 and beyond are not considered, as there is only a single analyst providing estimates. Specifically, the sell-side expects NIO to turn around from a non-GAAP adjusted net loss per share of -RMB0.52 in FY 2023 to generate a normalized earnings per share of RMB1.48 in FY 2024, prior to jumping by +906% to deliver an adjusted EPS of RMB14.93 in FY 2025.</p><p>But there are risks which could push back the timeline for NIO to achieve profitability.</p><p>NIO has historically been focused on the premium segment in the Chinese EV market. If the company is to grow its sales as fast as the market expects, NIO has to be successful with its efforts to penetrate the mass market segment. NIO&#39;s launch of the ET5 model is a key move for the company to grab a share of the mass market EV segment in China; the company highlighted at its Q4 2021 earnings call that &#34;ET5 has attracted a wider and more diversified user base.&#34;</p><p>Nevertheless, it is too early to conclude that NIO will be able to compete well in the mass market segment. NIO acknowledged at the company&#39;s recent fourth-quarter results briefing that its mass-market EV strategy &#34;needs to be efficiency driven.&#34; NIO also added that it has to &#34;rethink the fundamental architecture of our product&#34; with respect to the mass market, and these include factors like &#34;materials&#34; and &#34;manufacturing technologies.&#34;</p><p>In other words, if NIO does not do well in the mass market EV segment, this could translate into a slower pace of sales growth and a longer time to reach profitability.</p><p>At the same time, NIO&#39;s efforts to pivot towards the mass market segment might also divert management attention away from its core premium segment products at a time when competition is still stiff. A<i>Bernstein</i>survey cited in a <i>CNBC</i> article dated November 2, 2021 found that &#34;Tesla (TSLA), followed by premium German brands like BMW (OTCPK:BMWYY) and Audi (OTCPK:AUDVF)&#34; were the &#34;next most-favored&#34; premium EV brands in China behind domestic brands.</p><p>In summary, NIO will continue to grow its top line and improve its profitability in the next five years. But the company&#39;s share price performance in the intermediate term will be dependent on the pace of its revenue growth and the time it takes to become profitable.</p><p>Is NIO Stock A Buy, Sell, or Hold?</p><p>NIO stock is a Hold for me.</p><p><b>NIO&#39;s Peer Valuation Comparison</b></p><p><img src=\"https://static.tigerbbs.com/d7dd7749a854c1f89fadf31b66520aa3\" tg-width=\"600\" tg-height=\"305\" width=\"100%\" height=\"auto\"/>Source:<i>S&amp;P Capital IQ</i></p><p>NIO&#39;s valuations are reasonable on an absolute basis (low-single digit Enterprise Value-to-Revenue multiple) following the year-to-date -32% share price correction. But the company is valued at a premium to its peers despite slower revenue growth (on a relative basis compared to peers) in Q4 2021 as highlighted earlier in this article. Moreover, NIO&#39;s consensus one-year forward revenue growth rate is lower than that for XPEV and LI, and NIO&#39;s consensus forward gross profit margins are also inferior to that of Li Auto.</p><p>Taking into account NIO&#39;s valuations and the uncertainty with respect to its future five-year outlook (mass market success is key), I view NIO as deserving of a Hold or Neutral rating.</p></body></html>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will NIO Stock Be In 5 Years?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will NIO Stock Be In 5 Years?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-04-08 09:02 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4500274-nio-stock-5-years><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryI have a mixed view of NIO, following a review of its recent key metrics, namely revenue, vehicle gross margin and deliveries.NIO is expected to scale up and turn profitable within the next ...</p>\n\n<a href=\"https://seekingalpha.com/article/4500274-nio-stock-5-years\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NIO":"蔚来"},"source_url":"https://seekingalpha.com/article/4500274-nio-stock-5-years","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1110987574","content_text":"SummaryI have a mixed view of NIO, following a review of its recent key metrics, namely revenue, vehicle gross margin and deliveries.NIO is expected to scale up and turn profitable within the next five years, but this is dependent on the company growing sales by successfully penetrating the mass market.I have a Hold investment rating for NIO after analyzing the key valuation and financial metrics for the company and its peers.Elevator PitchI assign a Hold rating to NIO Inc.'s (NYSE:NIO) shares.In five years' time, Chinese electric vehicle or EV maker NIO will be larger in size (revenue base) and witness an improvement in its profitability (gross margin expansion and becoming profitable at the net profit level). But slower-than-expected top line growth and a delay in the company's path to profitability (net profit level) in the years ahead are the key downside risks, assuming that it is less successful in mass-market penetration than what investors would expect. NIO's valuations have become more reasonable (single-digit EV-to-Revenue) following the correction in its stock price, but the stock is still more expensive than its Chinese EV peers. Considering the above-mentioned factors, I have a Hold investment rating for NIO, instead of a Buy or Sell.NIO Stock Key MetricsThere are three key metrics for NIO that investors should focus on, namely revenue, vehicle gross margin, and deliveries.As per itsQ4 2021 financial results press release, NIO's top line increased by +49% YoY from RMB6,641 million in the fourth quarter of 2020 to RMB9,901 million in the most recent quarter. The company's Q4 2021 revenue was largely in line with market expectations, as it exceeded the market consensus' sales forecast by+1.5%.On the flip side, NIO's revenue only grew by a marginal +1% on a QoQ basis in the fourth quarter of last year. As a comparison, revenue for its peers, XPeng Inc. (XPEV) and Li Auto Inc. (LI), expanded by +50% QoQ and +36% QoQ, respectively in local currency terms in Q4 2021. On a YoY basis, XPEV and LI's revenue growth rates were also relatively faster at +200% and +156%, respectively in the recent quarter. As NIO didn't launch any new models last year, its top line expansion has trailed its key Chinese EV peers.In terms of profitability, NIO disclosed at its recent quarterly earnings briefing that its vehicle gross margin improved by +280 basis points QoQ and +360 basis points YoY to 20.9% in Q4 2021. The company attributed the gross margin improvement in the recent quarter to the growth in \"revenue per vehicle\" and cost savings brought about using a different battery, specifically the \"75kWh LFP NCM hybrid battery.\"However, NIO has guided for a relatively lower vehicle gross margin in the 18%-20% range for full-year 2022. In contrast, NIO's full-year FY 2021 vehicle gross margin was 20.1%. The weaker vehicle gross margin guidance for this year is largely due to expectations of higher raw material costs which will be a drag on the company's FY 2022 profitability.Separately, NIOannouncedthe company's Q1 2022 vehicle deliveries at the beginning of April. NIO's deliveries in the first quarter of this amounting to 25,768 units were equivalent to a +29% YoY increase and represented a new historical high. But the company's Q1 2022 vehicle deliveries only increased by a modest +3% on a QoQ basis. NIO has plans in place to launch three new models (ET7, ET5 and ES7) in 2022, and the first model, ET7, was only delivered in late-March 2022. NIO's first-quarter deliveries are still growing slowly, as the Q1 2022 numbers have not reflected the growth from new model launches yet.In conclusion, NIO's key metrics show a mixed picture for the company. This might explain why the company's share price performance has been lackluster following its recent quarterly results announcement on March 24, 2022 after trading hours. NIO's stock price has declined slightly by -1.4% from $21.98 as of March 24, 2022 to $21.68 as of April 6, 2022.Is NIO Expected To Grow?In the short term, NIO is still expected to grow in 2022 albeit at a slower pace as compared to 2021.As per the chart below, the sell-side analysts have been cutting NIO's top line forecasts for 1H 2022, after the company reported Q1 2022 deliveries and Q4 2021 results. The analysts also expect some of the company's revenue to be deferred to the second half of the year, as seen with the increase in consensus sales forecasts for Q3 2022 and Q4 2022.Revisions To Consensus Quarterly Revenue Estimates For NIOSeeking AlphaOn a full-year basis, the market consensus sees NIO's revenue growth slowing from +108% in fiscal 2020 and +122% in FY 2021 to +75% in FY 2022, as perS&P Capital IQ data. There are a number of factors that account for NIO's slower top line expansion this year. All the players in the global automotive industry are expected to be negatively impacted by supply chain disruptions and semiconductor shortage issues, and NIO is no exception. Furthermore, apart from the ET7 starting deliveries in late-March, the company's other two models, ET5 and ES7, are only scheduled to commence deliveries in September 2022 and Q3 2022, respectively as per management comments at the recent Q4 earnings call. As such, it is natural that deliveries and revenue are weighted towards the second half of the year, which explains NIO's modest revenue growth on a full-year basis for 2022.Separately, COVID-19 lockdowns in parts of China could also pose downside risks to production and deliveries for NIO and its Chinese EV peers, as highlighted in this March 31, 2022 Seeking Alpha News article.With regards to profitability, I noted in the prior section of this article that NIO's vehicle gross margin guidance (declining from 20.1% in fiscal 2021 to 19.0% in fiscal 2022 as per mid-point of guidance) points to relatively weaker profitability for the company this year due to raw material cost pressure. Similarly, the sell-side's consensus numbers suggest that NIO's headline gross profit margin (as opposed to non-GAAP vehicle gross margin metric) will similarly contract from 18.9% in FY 2021 to 18.0% in FY 2022 as per financial data sourced from S&P Capital IQ.NIO's shares are down by-32%year-to-date in 2022, and this reflects the company's slower top line growth and weaker profitability expectations this year to some extent.Where Will NIO Stock Be In 5 Years?In the next couple of years, NIO is expected to scale up to profitability, and this is the key medium-term re-rating catalyst for the stock.At the company's Q4 2021 investor call, NIO noted that it expects to \"achieve breakeven or reach profitability in 2024 for the full year.\" This is in line with the consensus sell-side forecasts as perS&P Capital IQ.Sell-side analysts see NIO growing the company's revenue by a +51% CAGR from RMB36 billion in fiscal 2021 to RMB187 billion in FY 2025. NIO's headline reported gross margin is forecasted to expand from 18.9% to 22.4% over the same period, thanks to economies of scale. Financial forecasts for 2026 and beyond are not considered, as there is only a single analyst providing estimates. Specifically, the sell-side expects NIO to turn around from a non-GAAP adjusted net loss per share of -RMB0.52 in FY 2023 to generate a normalized earnings per share of RMB1.48 in FY 2024, prior to jumping by +906% to deliver an adjusted EPS of RMB14.93 in FY 2025.But there are risks which could push back the timeline for NIO to achieve profitability.NIO has historically been focused on the premium segment in the Chinese EV market. If the company is to grow its sales as fast as the market expects, NIO has to be successful with its efforts to penetrate the mass market segment. NIO's launch of the ET5 model is a key move for the company to grab a share of the mass market EV segment in China; the company highlighted at its Q4 2021 earnings call that \"ET5 has attracted a wider and more diversified user base.\"Nevertheless, it is too early to conclude that NIO will be able to compete well in the mass market segment. NIO acknowledged at the company's recent fourth-quarter results briefing that its mass-market EV strategy \"needs to be efficiency driven.\" NIO also added that it has to \"rethink the fundamental architecture of our product\" with respect to the mass market, and these include factors like \"materials\" and \"manufacturing technologies.\"In other words, if NIO does not do well in the mass market EV segment, this could translate into a slower pace of sales growth and a longer time to reach profitability.At the same time, NIO's efforts to pivot towards the mass market segment might also divert management attention away from its core premium segment products at a time when competition is still stiff. ABernsteinsurvey cited in a CNBC article dated November 2, 2021 found that \"Tesla (TSLA), followed by premium German brands like BMW (OTCPK:BMWYY) and Audi (OTCPK:AUDVF)\" were the \"next most-favored\" premium EV brands in China behind domestic brands.In summary, NIO will continue to grow its top line and improve its profitability in the next five years. But the company's share price performance in the intermediate term will be dependent on the pace of its revenue growth and the time it takes to become profitable.Is NIO Stock A Buy, Sell, or Hold?NIO stock is a Hold for me.NIO's Peer Valuation ComparisonSource:S&P Capital IQNIO's valuations are reasonable on an absolute basis (low-single digit Enterprise Value-to-Revenue multiple) following the year-to-date -32% share price correction. But the company is valued at a premium to its peers despite slower revenue growth (on a relative basis compared to peers) in Q4 2021 as highlighted earlier in this article. Moreover, NIO's consensus one-year forward revenue growth rate is lower than that for XPEV and LI, and NIO's consensus forward gross profit margins are also inferior to that of Li Auto.Taking into account NIO's valuations and the uncertainty with respect to its future five-year outlook (mass market success is key), I view NIO as deserving of a Hold or Neutral rating.","news_type":1},"isVote":1,"tweetType":1,"viewCount":146,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":9032861848,"gmtCreate":1647330434691,"gmtModify":1676534217405,"author":{"id":"3569390203482079","authorId":"3569390203482079","name":"pufferfish","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":1,"crmLevelSwitch":0,"followedFlag":false,"authorIdStr":"3569390203482079","idStr":"3569390203482079"},"themes":[],"htmlText":"Those 5 companies will worth a lot more the second the delist from the US.&nbsp;","listText":"Those 5 companies will worth a lot more the second the delist from the US.&nbsp;","text":"Those 5 companies will worth a lot more the second the delist from the US.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9032861848","repostId":"1183488934","repostType":2,"repost":{"id":"1183488934","kind":"news","weMediaInfo":{"introduction":"Providing stock market headlines, business news, financials and earnings ","home_visible":1,"media_name":"Tiger Newspress","id":"1079075236","head_image":"https://static.tigerbbs.com/8274c5b9d4c2852bfb1c4d6ce16c68ba"},"pubTimestamp":1647324534,"share":"https://ttm.financial/m/news/1183488934?lang=&edition=fundamental","pubTime":"2022-03-15 14:08","market":"us","language":"en","title":"Tesla‘s Market Cap ≈ Sum of Five Chinese Internet Giants","url":"https://stock-news.laohu8.com/highlight/detail?id=1183488934","media":"Tiger Newspress","summary":"According to the closing price on March 14 in the U.S. market, Tesla is almost equal to the sum of T","content":"<html><head></head><body><p>According to the closing price on March 14 in the U.S. market, Tesla is almost equal to the sum of Tencent, Alibaba, Meituan,JD.com and Netease by market cap.<img src=\"https://static.tigerbbs.com/12b625c7a48052a2ca919a67e47c093a\" tg-width=\"1500\" tg-height=\"1700\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/></p></body></html>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Tesla‘s Market Cap ≈ Sum of Five Chinese Internet Giants</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nTesla‘s Market Cap ≈ Sum of Five Chinese Internet Giants\n</h2>\n\n<h4 class=\"meta\">\n\n\n<a class=\"head\" href=\"https://laohu8.com/wemedia/1079075236\">\n\n\n<div class=\"h-thumb\" style=\"background-image:url(https://static.tigerbbs.com/8274c5b9d4c2852bfb1c4d6ce16c68ba);background-size:cover;\"></div>\n\n<div class=\"h-content\">\n<p class=\"h-name\">Tiger Newspress </p>\n<p class=\"h-time\">2022-03-15 14:08</p>\n</div>\n\n</a>\n\n\n</h4>\n\n</header>\n<article>\n<html><head></head><body><p>According to the closing price on March 14 in the U.S. market, Tesla is almost equal to the sum of Tencent, Alibaba, Meituan,JD.com and Netease by market cap.<img src=\"https://static.tigerbbs.com/12b625c7a48052a2ca919a67e47c093a\" tg-width=\"1500\" tg-height=\"1700\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/></p></body></html>\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"TSLA":"特斯拉","NTES":"网易","BABA":"阿里巴巴","JD":"京东","00700":"腾讯控股","03690":"美团-W"},"source_url":"","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1183488934","content_text":"According to the closing price on March 14 in the U.S. market, Tesla is almost equal to the sum of Tencent, Alibaba, Meituan,JD.com and Netease by market cap.","news_type":1},"isVote":1,"tweetType":1,"viewCount":380,"authorTweetTopStatus":1,"verified":2,"comments":[{"author":{"id":"9000000000000417","authorId":"9000000000000417","name":"bouncyo","avatar":"https://static.tigerbbs.com/eb0370d3fa6e993a9a62f4b7ba0130a1","crmLevel":1,"crmLevelSwitch":0,"authorIdStr":"9000000000000417","idStr":"9000000000000417"},"content":"Hello, what are the five companies? They don't seem to be mentioned in the article.","text":"Hello, what are the five companies? They don't seem to be mentioned in the article.","html":"Hello, what are the five companies? They don't seem to be mentioned in the article."}],"imageCount":0,"langContent":"EN","totalScore":0}],"hots":[{"id":9032861848,"gmtCreate":1647330434691,"gmtModify":1676534217405,"author":{"id":"3569390203482079","authorId":"3569390203482079","name":"pufferfish","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":1,"crmLevelSwitch":0,"followedFlag":false,"idStr":"3569390203482079","authorIdStr":"3569390203482079"},"themes":[],"htmlText":"Those 5 companies will worth a lot more the second the delist from the US.&nbsp;","listText":"Those 5 companies will worth a lot more the second the delist from the US.&nbsp;","text":"Those 5 companies will worth a lot more the second the delist from the US.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9032861848","repostId":"1183488934","repostType":2,"repost":{"id":"1183488934","kind":"news","weMediaInfo":{"introduction":"Providing stock market headlines, business news, financials and earnings ","home_visible":1,"media_name":"Tiger Newspress","id":"1079075236","head_image":"https://static.tigerbbs.com/8274c5b9d4c2852bfb1c4d6ce16c68ba"},"pubTimestamp":1647324534,"share":"https://ttm.financial/m/news/1183488934?lang=&edition=fundamental","pubTime":"2022-03-15 14:08","market":"us","language":"en","title":"Tesla‘s Market Cap ≈ Sum of Five Chinese Internet Giants","url":"https://stock-news.laohu8.com/highlight/detail?id=1183488934","media":"Tiger Newspress","summary":"According to the closing price on March 14 in the U.S. market, Tesla is almost equal to the sum of T","content":"<html><head></head><body><p>According to the closing price on March 14 in the U.S. market, Tesla is almost equal to the sum of Tencent, Alibaba, Meituan,JD.com and Netease by market cap.<img src=\"https://static.tigerbbs.com/12b625c7a48052a2ca919a67e47c093a\" tg-width=\"1500\" tg-height=\"1700\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/></p></body></html>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Tesla‘s Market Cap ≈ Sum of Five Chinese Internet Giants</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; 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overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nTesla‘s Market Cap ≈ Sum of Five Chinese Internet Giants\n</h2>\n\n<h4 class=\"meta\">\n\n\n<a class=\"head\" href=\"https://laohu8.com/wemedia/1079075236\">\n\n\n<div class=\"h-thumb\" style=\"background-image:url(https://static.tigerbbs.com/8274c5b9d4c2852bfb1c4d6ce16c68ba);background-size:cover;\"></div>\n\n<div class=\"h-content\">\n<p class=\"h-name\">Tiger Newspress </p>\n<p class=\"h-time\">2022-03-15 14:08</p>\n</div>\n\n</a>\n\n\n</h4>\n\n</header>\n<article>\n<html><head></head><body><p>According to the closing price on March 14 in the U.S. market, Tesla is almost equal to the sum of Tencent, Alibaba, Meituan,JD.com and Netease by market cap.<img src=\"https://static.tigerbbs.com/12b625c7a48052a2ca919a67e47c093a\" tg-width=\"1500\" tg-height=\"1700\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/></p></body></html>\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"TSLA":"特斯拉","NTES":"网易","BABA":"阿里巴巴","JD":"京东","00700":"腾讯控股","03690":"美团-W"},"source_url":"","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1183488934","content_text":"According to the closing price on March 14 in the U.S. market, Tesla is almost equal to the sum of Tencent, Alibaba, Meituan,JD.com and Netease by market cap.","news_type":1},"isVote":1,"tweetType":1,"viewCount":380,"authorTweetTopStatus":1,"verified":2,"comments":[{"author":{"id":"9000000000000417","authorId":"9000000000000417","name":"bouncyo","avatar":"https://static.tigerbbs.com/eb0370d3fa6e993a9a62f4b7ba0130a1","crmLevel":1,"crmLevelSwitch":0,"idStr":"9000000000000417","authorIdStr":"9000000000000417"},"content":"Hello, what are the five companies? They don't seem to be mentioned in the article.","text":"Hello, what are the five companies? They don't seem to be mentioned in the article.","html":"Hello, what are the five companies? They don't seem to be mentioned in the article."}],"imageCount":0,"langContent":"EN","totalScore":0},{"id":9015071870,"gmtCreate":1649400467909,"gmtModify":1676534506209,"author":{"id":"3569390203482079","authorId":"3569390203482079","name":"pufferfish","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":1,"crmLevelSwitch":0,"followedFlag":false,"idStr":"3569390203482079","authorIdStr":"3569390203482079"},"themes":[],"htmlText":"In 5 year, nio would be delist from the US, become one of the best car manufacturers and in China. Nio is better not in US.","listText":"In 5 year, nio would be delist from the US, become one of the best car manufacturers and in China. Nio is better not in US.","text":"In 5 year, nio would be delist from the US, become one of the best car manufacturers and in China. Nio is better not in US.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9015071870","repostId":"1110987574","repostType":2,"isVote":1,"tweetType":1,"viewCount":146,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":370881407692880,"gmtCreate":1731565389452,"gmtModify":1731565722052,"author":{"id":"3569390203482079","authorId":"3569390203482079","name":"pufferfish","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":1,"crmLevelSwitch":0,"followedFlag":false,"idStr":"3569390203482079","authorIdStr":"3569390203482079"},"themes":[],"htmlText":"8%-14% annual growth, that's not very strong&nbsp;","listText":"8%-14% annual growth, that's not very strong&nbsp;","text":"8%-14% annual growth, that's not very strong","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/370881407692880","repostId":"2483819621","repostType":2,"repost":{"id":"2483819621","kind":"live","pubTimestamp":1731564426,"share":"https://ttm.financial/m/news/2483819621?lang=&edition=fundamental","pubTime":"2024-11-14 14:07","market":"us","language":"en","title":"ASML Upholds 2030 Sales Forecast in Bet on AI-Driven Demand","url":"https://stock-news.laohu8.com/highlight/detail?id=2483819621","media":"Bloomberg","summary":"ASML Holding, the Dutch maker of advanced chip-making machines that are critical to the world’s supp","content":"<html><head></head><body><p><a href=\"https://laohu8.com/S/ASML\">ASML Holding</a>, the Dutch maker of advanced chip-making machines that are critical to the world’s supply chains, reaffirmed its bullish long-term revenue outlook as it bets on an artificial intelligence-driven boom in semiconductor demand.</p><p>The Dutch firm projected that sales in 2030 will range from €44 billion ($46 billion) to €60 billion, in line with its previous forecast, according to a statement issued as part of the company’s investor day on Thursday.</p><p>ASML is the only company in the world that makes the kind of lithography machines that help semiconductor companies in turn produce the advanced chips powering everything from Apple Inc.’s smartphones to Nvidia Corp.’s AI accelerators. As such, it is often viewed as a bellwether for the broader industry and an early indicator of global semiconductor demand.</p><p>“We confirm our capital allocation strategy, and expect to continue to return significant amounts of cash to our shareholders through a combination of growing dividends and share buybacks,” ASML Chief Financial Officer Roger Dassen said in the statement.</p><p style=\"text-align: start;\">The company forecast a gross margin of between approximately 56% and 60% in 2030.</p><p>ASML’s order intake significantly missed analysts’ estimates in the third quarter, sparking a selloff in its shares and those of other chip-related businesses. The company also cut its sales outlook for next year. Chipmakers such as Nvidia have enjoyed a boom in demand for their AI chips. But sales to other key buyers, including automakers and mobile phone and PC manufacturers, have remained mired in a prolonged slump.</p><p style=\"text-align: start;\">ASML shares are down 7.9% this year.</p><p style=\"text-align: start;\">Also weighing on ASML’s prospects is the US government’s ongoing effort to limit China’s rise in the semiconductor sector, through repeated rounds of export controls that have targeted the sale of advanced artificial intelligence chips and chipmaking equipment. The Dutch government has struggled to find a middle ground between its US ally and ASML’s biggest market.</p><p style=\"text-align: start;\">Due to the US pressure, ASML has never been able to sell its cutting-edge extreme ultraviolet lithography machines to the Asian nation and was restricted from shipping its second most-advanced tools from this year.</p><p>China accounted for €2.79 billion of sales in the third quarter, nearly half of ASML’s total. The company expects China sales to account for about 20% of total revenue next year. ASML expects pressure will grow from the US to further restrict sales of semiconductor technology to China, Fouquet said in an interview with Bloomberg in October.</p><p style=\"text-align: start;\">Fouquet, who took the helm at ASML in April, told investors in October that he expects a slow chip market recovery to extend “well into 2025.” Still, next year and 2026 will be growth years for the industry and ASML overall, he said.</p></body></html>","source":"lsy1584095487587","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>ASML Upholds 2030 Sales Forecast in Bet on AI-Driven Demand</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nASML Upholds 2030 Sales Forecast in Bet on AI-Driven Demand\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-14 14:07 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.bloomberg.com/news/articles/2024-11-14/asml-upholds-2030-sales-forecast-in-bet-on-ai-driven-demand><strong>Bloomberg</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>ASML Holding, the Dutch maker of advanced chip-making machines that are critical to the world’s supply chains, reaffirmed its bullish long-term revenue outlook as it bets on an artificial intelligence...</p>\n\n<a href=\"https://www.bloomberg.com/news/articles/2024-11-14/asml-upholds-2030-sales-forecast-in-bet-on-ai-driven-demand\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"ASML":"阿斯麦"},"source_url":"https://www.bloomberg.com/news/articles/2024-11-14/asml-upholds-2030-sales-forecast-in-bet-on-ai-driven-demand","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"2483819621","content_text":"ASML Holding, the Dutch maker of advanced chip-making machines that are critical to the world’s supply chains, reaffirmed its bullish long-term revenue outlook as it bets on an artificial intelligence-driven boom in semiconductor demand.The Dutch firm projected that sales in 2030 will range from €44 billion ($46 billion) to €60 billion, in line with its previous forecast, according to a statement issued as part of the company’s investor day on Thursday.ASML is the only company in the world that makes the kind of lithography machines that help semiconductor companies in turn produce the advanced chips powering everything from Apple Inc.’s smartphones to Nvidia Corp.’s AI accelerators. As such, it is often viewed as a bellwether for the broader industry and an early indicator of global semiconductor demand.“We confirm our capital allocation strategy, and expect to continue to return significant amounts of cash to our shareholders through a combination of growing dividends and share buybacks,” ASML Chief Financial Officer Roger Dassen said in the statement.The company forecast a gross margin of between approximately 56% and 60% in 2030.ASML’s order intake significantly missed analysts’ estimates in the third quarter, sparking a selloff in its shares and those of other chip-related businesses. The company also cut its sales outlook for next year. Chipmakers such as Nvidia have enjoyed a boom in demand for their AI chips. But sales to other key buyers, including automakers and mobile phone and PC manufacturers, have remained mired in a prolonged slump.ASML shares are down 7.9% this year.Also weighing on ASML’s prospects is the US government’s ongoing effort to limit China’s rise in the semiconductor sector, through repeated rounds of export controls that have targeted the sale of advanced artificial intelligence chips and chipmaking equipment. The Dutch government has struggled to find a middle ground between its US ally and ASML’s biggest market.Due to the US pressure, ASML has never been able to sell its cutting-edge extreme ultraviolet lithography machines to the Asian nation and was restricted from shipping its second most-advanced tools from this year.China accounted for €2.79 billion of sales in the third quarter, nearly half of ASML’s total. The company expects China sales to account for about 20% of total revenue next year. ASML expects pressure will grow from the US to further restrict sales of semiconductor technology to China, Fouquet said in an interview with Bloomberg in October.Fouquet, who took the helm at ASML in April, told investors in October that he expects a slow chip market recovery to extend “well into 2025.” Still, next year and 2026 will be growth years for the industry and ASML overall, he said.","news_type":1},"isVote":1,"tweetType":1,"viewCount":42,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":333346337390752,"gmtCreate":1722411451103,"gmtModify":1722412070829,"author":{"id":"3569390203482079","authorId":"3569390203482079","name":"pufferfish","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":1,"crmLevelSwitch":0,"followedFlag":false,"idStr":"3569390203482079","authorIdStr":"3569390203482079"},"themes":[],"htmlText":"<a href=\"https://ttm.financial/S/SOFI\">$SoFi Technologies Inc.(SOFI)$ </a>&nbsp;","listText":"<a href=\"https://ttm.financial/S/SOFI\">$SoFi Technologies Inc.(SOFI)$ </a>&nbsp;","text":"$SoFi Technologies Inc.(SOFI)$","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/333346337390752","isVote":1,"tweetType":1,"viewCount":153,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":376195190038608,"gmtCreate":1732846327202,"gmtModify":1732846331017,"author":{"id":"3569390203482079","authorId":"3569390203482079","name":"pufferfish","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":1,"crmLevelSwitch":0,"followedFlag":false,"idStr":"3569390203482079","authorIdStr":"3569390203482079"},"themes":[],"htmlText":"Sofi","listText":"Sofi","text":"Sofi","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/376195190038608","isVote":1,"tweetType":1,"viewCount":16,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":374775735607552,"gmtCreate":1732519861896,"gmtModify":1732519865558,"author":{"id":"3569390203482079","authorId":"3569390203482079","name":"pufferfish","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":1,"crmLevelSwitch":0,"followedFlag":false,"idStr":"3569390203482079","authorIdStr":"3569390203482079"},"themes":[],"htmlText":"Unity will come back","listText":"Unity will come back","text":"Unity will come back","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/374775735607552","repostId":"2486477187","repostType":2,"repost":{"id":"2486477187","kind":"highlight","pubTimestamp":1732517531,"share":"https://ttm.financial/m/news/2486477187?lang=&edition=fundamental","pubTime":"2024-11-25 14:52","market":"hk","language":"en","title":"Unity's Potential Turnaround, Will It Pull It Off?","url":"https://stock-news.laohu8.com/highlight/detail?id=2486477187","media":"seekingalpha","summary":"Unity Software is recommended as a speculative investment despite its past missteps, with new leadership aiming to revitalize the company and its offerings.The company's \"Grow\" segment, which focuses on in-game advertising, has faced significant challenges but is undergoing a fundamental rebuild to enhance ROAS.Unity's \"Create\" business has launched Unity 6 with substantial improvements and repealed unpopular runtime fees, aiming to regain developer trust and market share.The potential for Unity to emulate AppLovin's success in the in-game advertising space presents a compelling turnaround opportunity with significant upside if successful.   Kobus Louw/E+ via Getty Images  Can Unity pull off a comeback after blowing some significant opportunities?Turnarounds are not the most popular of recommendations-particularly in the IT space. I doubt if their success ratio reaches 50%. They sound good in the","content":"<html><head></head><body><ul style=\"\"><li><p>Unity Software is recommended as a speculative investment despite its past missteps, with new leadership aiming to revitalize the company and its offerings.</p></li><li><p>The company&#39;s &#34;Grow&#34; segment, which focuses on in-game advertising, has faced significant challenges but is undergoing a fundamental rebuild to enhance ROAS.</p></li><li><p>Unity&#39;s &#34;Create&#34; business has launched Unity 6 with substantial improvements and repealed unpopular runtime fees, aiming to regain developer trust and market share.</p></li><li><p>The potential for Unity to emulate AppLovin&#39;s success in the in-game advertising space presents a compelling turnaround opportunity with significant upside if successful.</p></li></ul><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/9aab87d96396829e18d4c3217e944476\" tg-width=\"750\" tg-height=\"396\"/></p><p></p><h2 id=\"id_3265277554\">Can Unity pull off a comeback after blowing some significant opportunities?</h2><p style=\"text-align: left;\">Turnarounds are not the most popular of recommendations-particularly in the IT space. I doubt if their success ratio reaches 50%. They sound good in the reading, but then something emerges from the woodwork, and they simply do not work out. That said, there have been some significant exceptions, and indeed AppLovin (APP), perhaps the most successful stock IT stock in 2024 is a significant example. And yet here I am, recommending Unity Software (NYSE:U) as an investment, or least a speculation.</p><p style=\"text-align: left;\">Unity shares have fallen by more than 17% in the last year, and they are down almost 50% in the last two years. Rally attempts have been feeble and met by selling. The shares are up by about 64% since their absolute nadir of $13.93, their closing price on 8/8/24. But after a positive earnings report in early November that drove the shares to as high as $22.86, they have fallen back by 22% before a very recent back to the post earnings report level.</p><p style=\"text-align: left;\">There are plenty of investors who won’t touch these shares and choose to exit the shares whenever an opportunity arises.</p><p style=\"text-align: left;\">The former CEO and his team made several major missteps that have brought this company, once a titan in terms of its technology in the gaming space, to a low ebb. First, the company’s ad monetization engine ran into significant technology issues on his watch. That was followed by a misbegotten and poorly executed merger with in-game advertising leader, ironSource. And finally, in an attempt to boost short-term revenue, the company, instituted a change to the pricing of its game creation software that infuriated game developers and has just recently been rescinded.</p><p style=\"text-align: left;\">As might be expected, the CEO whose miscues brought the company low, John Riccitiello, is gone now. He “retired” a bit more than a year ago. After a transitional CEO, Jim Whitehurst, who came from Silver Lake Partners, still a major investor in Unity with an 8.7% ownership stake, a new permanent CEO has been hired. Matt Bromberg started with the company in Mid-May. He had previously been the COO of Zynga, before its acquisition by Take-Two (TTWO) and previously had held leadership positions at Electronic Arts (EA). By October, Bromberg had brought in Steve Collins, a very well-known and respected game developer, as the Chief Technology Officer. In addition, a new CFO, Jarrod Yahes has been hired. He comes to the company from Shutterstock (SSTK), a company that provides a subscription service and à la carte access to stock photos that are used by a variety of customers in different industries, including the digital advertising space.</p><p style=\"text-align: left;\">All of that said, why look at Unity now at this price and this time. In the last several months, shares of AppLovin have taken off. I last recommended AppLovin shares on SA on July 5, 2024. In the last 4 months +, it has had a strong run-it has risen a bit over 280% in that span.</p><p style=\"text-align: left;\">Many subscribers have been wondering if there is another AppLovin out in cyber land. No doubt, AppLovin is going to be one of the best stocks to have owned in 2024. The shares are up no less than 653% YTD-that’s more than twice the percentage gain of Palantir (PLTR), no slouch in appreciation but trailing APP shares as the best performing IT stock in 2024. At this point, it seems like every institution that can justify owning APP shares wants to pile into the equity, which most recently has seen its RSI reach exorbitant levels.</p><p style=\"text-align: left;\">At this point, while the shares are a reasonable investment in terms of looking at the longer-term potential, the spectacular opportunity that they presented when they first introduced their version of AI, Axon 2.0 has been narrowed by the rapid appreciation of the shares.</p><p style=\"text-align: left;\">The recent success of AppLovin has been more or less entirely a factor of the success of Axon 2.0. For those unfamiliar with that product, it is an AI-powered engine whose predictive capabilities are based on machine learning that significantly improves the targeting accuracy of in-game ads. This has substantially increased the return on advertising spend (ROAS) for users and as their campaigns, based on Axon 2.0 produce positive results, they have continued to increase their Axon 2.0 investment. There is a significant virtuous cycle impact here-the greater the use of Axon 2.0, the more data is collected. More data improves the accuracy of predictions, raising the ROAS for customers, and they increase their spend on Axon 2.0. That is why AppLovin has been able to achieve such startling growth combined with extraordinary margins.</p><p style=\"text-align: left;\">Unity began its life offering a set of software tools to create sophisticated games. It was a pioneer in providing game creators with the tools they needed to create 3D games, and that was the focus of the company. It held a successful IPO in a bit more than 4 years ago. A logical evolution was the development of a set of what are called mediation tools which the game developers could use to monetize their creations.</p><p style=\"text-align: left;\">This was the foundation of Unity’s own in-game advertising product-the segment of its business that it calls “Grow.” Initially, Grow was very successful and was a leading vendor in the space, leveraging its position with Unity’s community of game creators. For a time, it was market leading and growing more rapidly than AppLovin.</p><p style=\"text-align: left;\">At the start of 2022, the efficacy of Grow’s algorithms saw an unexpected decline. It turned out that some of its algorithms had been corrupted and were not forecasting properly. In addition, the company discovered an error in its data collection technology which also crippled the efficacy of the solution. Needless to say this led to a decline in Grow revenues.</p><p style=\"text-align: left;\">In the summer of that year, Unity announced its intention to acquire an Israeli-based company called ironSource. ironSource probably had the industry-leading market share of the in-game advertising space at that time and had been growing rapidly. The merger process was attended with some drama as AppLovin, at that point, tried to merge with Unity on condition that Unity abandon its transaction to acquire ironSource.</p><p style=\"text-align: left;\">Ultimately, the AppLovin proposal was rejected and in November 2022, Unity acquired ironSource. The merger did not go well. There was a botched integration of ironSource into Unity Ads. Then the ironSource senior managers all departed Unity. Subsequently, there may have been an effort by ironSource middle managers to bully Unity staffers into resigning. ironSource and AppLovin had been existential competitors. That meant that the ironSource style was far more aggressive and clashed with Unity’s culture. I have linked here to an article that purports to provide an insight into the problems at the Unity Grow division. It is not pretty reading, and one has to be careful to try to disentangle the wheat from the chaff: fired or bullied employees are often less than objective in their evaluation. Many of the bullied or fired employees were ones who had apparently let the Unity mediation technology get stale and uncompetitive.</p><h2 id=\"id_1200816544\" style=\"text-align: left;\">Where is Unity Grow at this point?</h2><p style=\"text-align: left;\">Unity is a tale of two businesses. I have started this article looking at Grow-both because it is larger but also because it is the segment that competes with AppLovin and which perhaps has the potential to achieve some of the success that AppLovin has had with Axon 2.0.</p><p style=\"text-align: left;\">Unity Growth is actually the larger of the two revenue streams at Unity today. Last quarter its revenues were $298 million, down 5% year over year, but up by 1% sequentially Overall, Grow was 69% of total revenues. Obviously, at least some of the critique in the linked article above is a significant exaggeration, given that sequential revenues actually grew, albeit modestly. Just how much of the article represents the state of affairs within Unity Grow is difficult for me to determine as an outsider. Cultural clashes are never pretty, but are often necessary. A new management was never going to permit Grow to remain stuck in neutral.</p><p style=\"text-align: left;\">Grow revenues reached $253 million in Q4-2022. In the immediate wake of the purchase of ironSource, Grow revenues were $344 million. Overall, Grow revenues have declined about 26% over the last two years. Over the same span, AppLovin software platform revenues have risen from $306 million to $835 million, essentially a function of the performance of the Axon platform in creating superior ROAS for customers.</p><p style=\"text-align: left;\">Unity has a somewhat different vision of its go-to-market strategy for Grow when compared to AppLovin.</p><blockquote><p>Finally, we talked last quarter about embarking on a fundamental rebuild of our machine learning stack and data infrastructure designed to enhance the return on investment we’re able to deliver to our advertising customers. We’re happy to report great progress on that work, which is already in testing on live data. We’re very encouraged by the early results we’re seeing. We believe that our new data platform will not only drive performance improvements in user acquisition and monetization, but also surface insights critical to game production and live service management, where understanding consumer behavior is core to being able to build and operate great games. These investments are core to our vision of a unified platform that can deliver for our customers across the full lifecycle of game development.</p></blockquote><p style=\"text-align: left;\">This strategy comes from the playbook that has marked Unity’s vision in this space almost from the start of it creating its Grow business. As can be seen from the above quote from the company’s most recent shareholder letter, Unity sees in-game advertising as an integral component of …well, a unified strategy that goes from game creation to monetization.</p><blockquote><p>We&#39;re the only company in the world capable of providing a platform to power the entire development cycle from prototyping through live service management to user acquisition and monetization.</p></blockquote><p style=\"text-align: left;\">That is quite different from what AppLovin is currently doing; while it still has games that it has created, it does not offer game creation tools and its gaming business is a cash cow, and not really a part of its go-forward strategy.</p><p style=\"text-align: left;\">According to the company, despite the revenue decline of the Grow business, Unity’s customer base has not migrated to other in-game advertising solutions. What has happened, at least according to the management, is that because of the relative lower level of ROAS from the existing Unity platform, its users have moderated their spending for the in-game ads available on that platform, but haven’t deserted as customers either. I really have no way of validating the assertion.</p><p style=\"text-align: left;\">Like most anything else in the gestation process, evaluating the probability of success for is more of a guess than anything else. It has just been 15 months since Axon 2.0 was launched. At the time of the launch, some analysts were skeptics. I am linking here to an article which highlights some of the skepticism at that time.</p><p style=\"text-align: left;\">This is not intended to deprecate the skills of the mentioned analysts. As it happens, the Benchmark analyst mentioned in the article still has a sell rating on APP shares. The fact is, that when a product such as this is launched, many analysts will be skeptical and others will be more optimistic, and there simply will not be enough information to make much more than a guess.</p><p style=\"text-align: left;\">At the end of the day, it is all about efficacy. The buyers of ads are looking for quantifiable results. If the results are there, then there is a high probability that users will increase their investments on ad spending through the platform. I think management is very well aware of this. For the most part, developing this is a tedious and iterative process, but one that technology has made very doable over time.</p><p style=\"text-align: left;\">Management has made the assertion that because it offers both creation and monetization tools, it is in a position to offer unique insights.</p><blockquote><p>And as I said again, in in the opening statements, we think we are in a unique spot with respect to being the only company we believe in the world, that can sit as a platform through the entire lifecycle of development, from prototyping through to operating live service, and into monetization and advertising in UA. And those insights that we glean from being a platform, we can share those with our customers, and fundamentally offer insights that we think over time that no one else can. And to your point, we&#39;ve got work, to do that. But we know what the work is and its work that&#39;s doable. And we&#39;re excited about it. And we&#39;re seeing, we&#39;re seeing, and feeling the wind at our back from, from the perspective of Unity how customers are responding, and some of the early results of the investments we&#39;re making. So this is an -- it&#39;s a business that we really couldn&#39;t be more excited to be in.</p></blockquote><p style=\"text-align: left;\">It seems like a reasonable assertion, but again, at this point, it is difficult to validate. The CEO talked about the fact that game monetization is not necessarily a winner-take-all market.</p><blockquote><p>Game monetization will not be a winner to take all market. I can tell you for certain from personal experience that customers don&#39;t desire that outcome.</p></blockquote><p style=\"text-align: left;\">I think that is highly likely.</p><p style=\"text-align: left;\">The company hopes to replace its old solutions by the end of calendar Q1 or in Q2. Is a buy recommendation premature here? The opportunity to emulate some, if not all of AppLovin’s explosive growth probably will not start until the summer of next year. While I am a long-term investor, I recognize that not all readers will want to wait on that long to see any validation of a thesis. But, as it turns out, that is not necessary. The company’s other business, Create, has had some new initiatives and those initiatives have the potential to move the CAGR needle in the immediate future.</p><h2 id=\"id_753298061\" style=\"text-align: left;\">Unity’s Create business: There’s a lot new, including a 6.0 release, a pricing change, and the issue of using AI as a game development tool.</h2><p style=\"text-align: left;\">Unity’s Create Solutions revenue last quarter was $132 million, up 5% year-on-year and 2% sequentially. At this point, Create is 31% of Unity&#39;s total revenues.</p><p style=\"text-align: left;\">Unity 6 was announced for general availability last month. It should be noted that the company’s new CEO, Matt Bromberg, is an erstwhile game developer/game entrepreneur, and is apparently intimately familiar with the specifics of what features and functions creators need and crave. Some of the features will be familiar to developers and only developers. Others are universally understood. One of those is performance enhancements based on optimizations. Another is something called a GPU Resident Drawer. Overall, the company has cited a more than 2X improvement in the performance of its new offering. There are many other new features which probably resonate more with game developers than anyone else and are of less interest to many investors.</p><p style=\"text-align: left;\">At least as important as the new product itself was the repeal of run time fees. It was about a year ago when the company announced a significant pricing change by instituting runtime fee for the development of new games. This was enormously unpopular with many users and had crippled Unity’s ability to grow. It led to market share losses and immense customer dissatisfaction.</p><blockquote><p></p><p>So if you didn&#39;t want to pay the new prices, all you have to do is not upgrade. That obviously was not a great dynamic from our perspective. So in addition to the sort of relationship elements and changing fundamentally how we&#39;re talking to customers, there was also a really enormous practical impact in which, for example, at our Unite conference in Barcelona, where literally, 50 customers came up and said, hey I had said I told everybody internally no upgrade in Unity 6 and now that we&#39;ve -- you&#39;ve repealed it and you reverted to the subscription, we&#39;re a green light.</p><p>So those dynamics change real radically.</p><p>While the company did eliminate run time fees, it has instituted price increases. Typically, these increases play out over some time and they should be a significant tailwind over the course of 2025.</p></blockquote><p style=\"text-align: left;\">Another investment issue regarding Unity’s Create business has been that of genAI. Simply put, the question has been if the use of genAI can eliminate or reduce the need to use Unity, or any other set of tools, to create modern games. It is a more complex question than might be imagined. AI has been used for some time now as a part of the overall game creation process. It makes the process more efficient and speeds up the time to deliver a new game. The new CEO provided some insights into his perspectives on the issue: not terribly surprisingly it was anodyne and generic. Most likely the process of integrating genAI into the game creation process will be more incremental than existential.</p><p style=\"text-align: left;\">The CAGR estimates for game creation software overall range between 5% and 11% depending on which analysis is used. For many years, prior to the recent upsets, Unity Create had a CAGR many times that level because of its technology. The guidance this company provided on its latest call was sparse, both because of caution surrounding the cadence of a turnaround, and also because the CFO is interim, and will soon revert to a different role. Further, headline numbers still reflect the impact of Unity’s exit from non-core businesses.</p><p style=\"text-align: left;\">Revenues last quarter from the company’s core business components were $429 million. That compares to the prior forecast of $415-$420 million. The company increased full-year guidance by more than $50 million at the mid-point, suggesting some growth acceleration in its Create business in Q4. Understandably, in the midst of what is an existential product transition, it is not expecting Q4 will see any growth in its Grow business segment. Current published expectations for this current quarter are for revenues of $433 million. Published expectations for 2025 are for revenue growth of just 2%. After all that has gone on at Unity over the past couple of years, forecasts should and do err on the side of extreme caution. There are more than a few unknowns that need to be considered and evaluated in establishing forecasts for this company at this time.</p><p style=\"text-align: left;\">My own estimate for 2025 revenue is $1.92 billion, compared to the published consensus of $1.82 billion. It all depends on just how successful the turnaround is, and particularly if the Grow segment of the business can …well, start to grow itself when its new technology replaces the current flawed version being offered.</p><h2 id=\"id_4251066667\" style=\"text-align: left;\">Unity’s competition</h2><p style=\"text-align: left;\">There are many vendors offering game development software. I have linked here to the Gartner listing of competitors; it isn’t particularly useful. I have also linked to both the Reddit and the Quora threads.</p><p style=\"text-align: left;\">None of the analysis presented here is really relevant. Unity 6 is just now available, and it wasn’t available at the time these threads were compiled. And these threads were compiled prior to Unity rescinding its run time fees. Further, the appointment of a new CEO who has been a game developer and is intimately familiar with that culture and is able to understand and act on developer concerns is a factor that is likely to change the competitive calculus.</p><p style=\"text-align: left;\">Unity has lost a significant amount of user goodwill, although its market share loss, if any, is less clear. It can take time to reestablish favorable vibes in the developer community. I expect with the new products that have been introduced, coupled with a management that is likely to be perceived as developer friendly and concerned, market share gains are likely - although not all at once.</p><p style=\"text-align: left;\">With regard to Unity’s Grow segment, its competitor is AppLovin. If the technology that Unity ultimately brings to market can produce ROAS equal to or greater than that which AppLovin is currently providing its users, it will see substantial growth-far greater than anyone-and that includes this writer-is willing to currently forecast.</p><p style=\"text-align: left;\">I don’t think there is any secret as to what has to be done. As the CEO said on the recent conference call, it is an iterative process. If the integration of game creation and game monetization winds up actually producing a better ROAS, then the opportunity is enormous, and particularly so given the current intense skepticism that Unity will actually become a significant competitor to AppLovin. All things considered, it is one of the better bets available in the enterprise software space, but competing against AppLovin at this point is a high bar-although not really insurmountable.</p><h2 id=\"id_3499104257\" style=\"text-align: left;\">Unity’s Business Model-What it will be is a function of how successful its Grow initiative is.</h2><p style=\"text-align: left;\">Invariably, at this point in writing an article, I like to discuss the details of a company’s business model. That is what I am trained to do. In this case, discussing the details of the latest quarter are really not totally relevant. I am recommending Unity shares because I believe that the company’s efforts to reinvent itself have a reasonable probability of success. In particular, I think that the opportunity it has to become a realistic alternative to AppLovin within the in-game advertising space is significant and as yet under-appreciated. That is relevant because the margins that APP has achieved in that business are so substantial.</p><p style=\"text-align: left;\">Last quarter, AppLovin’s adjusted EBITDA margin in its software platform segment was 79%! The company’s overall free cash flow margin, which includes its margin on the games that it has created and published, was 45%. I do not wish to suggest that Unity will achieve these kinds of margins in the near future. But I present AppLovin’s most recent results simply to show what is possible.</p><p style=\"text-align: left;\">In this most recent quarter, Unity’s adjusted gross margin was 84%. The other cost ratios are elevated as the company will have to scale revenues to support its current infrastructure. Non-GAAP research and development expense was 29% compared to 27% in the year earlier period. Sales and marketing were 24% up by 400 bps year-on-year. Non-GAAP general and administrative expense, declined by 25% in dollars, and that was enough to hold the expense ratio steady at 10%.</p><p style=\"text-align: left;\">Overall, while the GAAP net loss margin was 28%, the company’s adjusted EBITDA margin was positive 21%. The company has been able to remain free cash flow positive. Much of its net loss has to do with its relatively substantial depreciation and amortization provision, which most recently was 24% of revenues. As capex is less than 2% of revenue, and stock-based comp. is 24% of revenues, the company, despite its current state, has been able to achieve free cash flow margin of 27%.</p><p style=\"text-align: left;\">What the business model might look like is entirely a function of how the company’s efforts to undo past errors and to develop an app monetization offering that can produce a strong level of ROAS for users evolves. Unity, like APP, has the potential to be very profitable, but it is all a function of the company’s product initiatives.</p><h2 id=\"id_1307660479\" style=\"text-align: left;\">Risks to the investment thesis.</h2><p style=\"text-align: left;\">This is a turnaround. And inherently, that makes the investment thesis risky. I don’t know the statistics-but my guess is that more turnarounds don’t achieve their full promise than those that do. There really are no secrets about the risks to this thesis.</p><p style=\"text-align: left;\">Unity has to be able to offer an in-game advertising solution that produces a very high ROAS-at least equivalent to what the ROAS has been for AppLovin’s Axon 2.0. Without the ability to offer that, the company will not be able to capture the potential growth is this, its major revenue segment.</p><p style=\"text-align: left;\">The company has rescinded its run-time charge. The issue, of course is, will the developer user community return and choose to upgrade to Unity 6.0. The price/performance advantages are there and so, too, are the functional improvements. But there are lots of customers who have become conspicuously unhappy by the aborted pricing change. Will they return as enthusiastic Unity customers? Will they upgrade? Will they accelerate their game creation efforts on the Unity platform?</p><p style=\"text-align: left;\">The gaming business has been cyclical. It saw exceptional growth during the period of the pandemic, when users reached a high point in terms of their engagement as other forms of recreation were severely circumscribed. Subsequently, as user engagement returned to more normal levels, the growth of the gaming business slowed. The overall environment has shown some improvements, but certainly should macro conditions deteriorate, this would impact Unity-it still has a 70% market share according to analysts for game creation tools.</p><p style=\"text-align: left;\">I think management chose the right individual to turn this around-at least based on his public pronouncements. He says the right things, and he is certainly on a mission to prove his ability to run a large game creation and monetization vendor. But the tasks ahead are non-trivial and require lots of execution and some luck as well. Those are the risks to the thesis.</p><h2 id=\"id_2775871599\" style=\"text-align: left;\">Wrapping up-The case to buy Unity shares now</h2><p style=\"text-align: left;\">The case to buy Unity shares is a bet on its potential turnaround. In particular, the thesis relates to the potential for Unity Grow, which has embarked on a complete revamp of its in-game advertising platform, to mimic some of the success that AppLovin has had with Axon 2.0. Management is well aware of what is needed to launch a successful offering in this space, and it is well along in terms of developing the appropriate technology for users. It is a tedious, iterative process, but it is the only way to ensure that users will get at least the level of ROAS that they are expecting.</p><p style=\"text-align: left;\">In addition, the company has rescinded the toxic run time fees that were misguidedly instituted by the prior CEO. And it has launched a new generation of its gaming engine with substantial price/performance improvements as well as significant improvement in graphics capabilities. The new CEO has a lengthy experience in the gaming industry, both as a developer and as the operator of a good-sized vendor. He seems likely to be able to restore Unity’s reputation in the space.</p><p style=\"text-align: left;\">Because this is a turn-around, precise quantification of the potential is not really possible. Whatever a prudent guess might be, it would be substantially bettered if the strategy works-and if the strategy doesn’t work, the investment won’t be saved by attractive valuation metrics-which, after all, are as much retrospective as prospective. Based on a revenue forecast that in no way reflects the potential for a turnaround, or one that starts to achieve results in 2025, my estimate of the EV/S ratio is a bit greater than 6X. But the reality is that if the turnaround works, that ratio would, perhaps, be 4X on 2026 revenues, and with a free cash flow margin that could easily top 40% as it is currently 24% without any positive impacts from new products.</p><p style=\"text-align: left;\">Over the course of writing this article, over the past week-just a few days really, Unity shares have appreciated 31%. Some of this is apparently a rumor that Microsoft might be interested in making a bid to acquire the company. I, personally, don’t quite see the logic of that transaction and whether I did or not, it would probably receive antitrust objections. I would not recommend Unity shares because of a potential merger-if it were to happen it would be lagniappe, at least for me.</p><p style=\"text-align: left;\">Also, recently, Cathy Wood’s ARK Innovation ETF sold $48 million of Unity shares after the company reported its most recent quarter.</p><p style=\"text-align: left;\">High-growth IT stocks have staged an impressive rally this week. A benchmark ETF, the IGV has rose by nearly 5% Investor seem of a “risk-on mindset. Speculating on the success of Unity’s turnaround is congruent with that mindset. I am not trying to opine here with regard to how investors should allocate portfolio resources to risk-on positions. Some readers will doubtless be concerned about the sharp rally in high-growth IT shares in the few weeks since the election. That is obviously a different subject than what I have tried to write about in this article.</p><p style=\"text-align: left;\">I believe that the risk/rewards of investing in Unity shares are quite compelling and that remains the case after the spike in valuation of the last few days. There is really room for another monetization engine in the in-games advertising space, and my belief is that Unity has a reasonable chance to be that alternative. I think the odds favor Unity shares achieving positive alpha over the next year and beyond.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Unity's Potential Turnaround, Will It Pull It Off?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nUnity's Potential Turnaround, Will It Pull It Off?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-25 14:52 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4739963-unity-u-stock-potential-turnaround-will-it-pull-it-off><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Unity Software is recommended as a speculative investment despite its past missteps, with new leadership aiming to revitalize the company and its offerings.The company's \"Grow\" segment, which focuses ...</p>\n\n<a href=\"https://seekingalpha.com/article/4739963-unity-u-stock-potential-turnaround-will-it-pull-it-off\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"LU1861559042.SGD":"日兴方舟颠覆性创新基金B SGD","BK4585":"ETF&股票定投概念","LU1861558580.USD":"日兴方舟颠覆性创新基金B","BK4588":"碎股","BK4023":"应用软件","BK4554":"元宇宙及AR概念","U":"Unity Software Inc."},"source_url":"https://seekingalpha.com/article/4739963-unity-u-stock-potential-turnaround-will-it-pull-it-off","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2486477187","content_text":"Unity Software is recommended as a speculative investment despite its past missteps, with new leadership aiming to revitalize the company and its offerings.The company's \"Grow\" segment, which focuses on in-game advertising, has faced significant challenges but is undergoing a fundamental rebuild to enhance ROAS.Unity's \"Create\" business has launched Unity 6 with substantial improvements and repealed unpopular runtime fees, aiming to regain developer trust and market share.The potential for Unity to emulate AppLovin's success in the in-game advertising space presents a compelling turnaround opportunity with significant upside if successful.Can Unity pull off a comeback after blowing some significant opportunities?Turnarounds are not the most popular of recommendations-particularly in the IT space. I doubt if their success ratio reaches 50%. They sound good in the reading, but then something emerges from the woodwork, and they simply do not work out. That said, there have been some significant exceptions, and indeed AppLovin (APP), perhaps the most successful stock IT stock in 2024 is a significant example. And yet here I am, recommending Unity Software (NYSE:U) as an investment, or least a speculation.Unity shares have fallen by more than 17% in the last year, and they are down almost 50% in the last two years. Rally attempts have been feeble and met by selling. The shares are up by about 64% since their absolute nadir of $13.93, their closing price on 8/8/24. But after a positive earnings report in early November that drove the shares to as high as $22.86, they have fallen back by 22% before a very recent back to the post earnings report level.There are plenty of investors who won’t touch these shares and choose to exit the shares whenever an opportunity arises.The former CEO and his team made several major missteps that have brought this company, once a titan in terms of its technology in the gaming space, to a low ebb. First, the company’s ad monetization engine ran into significant technology issues on his watch. That was followed by a misbegotten and poorly executed merger with in-game advertising leader, ironSource. And finally, in an attempt to boost short-term revenue, the company, instituted a change to the pricing of its game creation software that infuriated game developers and has just recently been rescinded.As might be expected, the CEO whose miscues brought the company low, John Riccitiello, is gone now. He “retired” a bit more than a year ago. After a transitional CEO, Jim Whitehurst, who came from Silver Lake Partners, still a major investor in Unity with an 8.7% ownership stake, a new permanent CEO has been hired. Matt Bromberg started with the company in Mid-May. He had previously been the COO of Zynga, before its acquisition by Take-Two (TTWO) and previously had held leadership positions at Electronic Arts (EA). By October, Bromberg had brought in Steve Collins, a very well-known and respected game developer, as the Chief Technology Officer. In addition, a new CFO, Jarrod Yahes has been hired. He comes to the company from Shutterstock (SSTK), a company that provides a subscription service and à la carte access to stock photos that are used by a variety of customers in different industries, including the digital advertising space.All of that said, why look at Unity now at this price and this time. In the last several months, shares of AppLovin have taken off. I last recommended AppLovin shares on SA on July 5, 2024. In the last 4 months +, it has had a strong run-it has risen a bit over 280% in that span.Many subscribers have been wondering if there is another AppLovin out in cyber land. No doubt, AppLovin is going to be one of the best stocks to have owned in 2024. The shares are up no less than 653% YTD-that’s more than twice the percentage gain of Palantir (PLTR), no slouch in appreciation but trailing APP shares as the best performing IT stock in 2024. At this point, it seems like every institution that can justify owning APP shares wants to pile into the equity, which most recently has seen its RSI reach exorbitant levels.At this point, while the shares are a reasonable investment in terms of looking at the longer-term potential, the spectacular opportunity that they presented when they first introduced their version of AI, Axon 2.0 has been narrowed by the rapid appreciation of the shares.The recent success of AppLovin has been more or less entirely a factor of the success of Axon 2.0. For those unfamiliar with that product, it is an AI-powered engine whose predictive capabilities are based on machine learning that significantly improves the targeting accuracy of in-game ads. This has substantially increased the return on advertising spend (ROAS) for users and as their campaigns, based on Axon 2.0 produce positive results, they have continued to increase their Axon 2.0 investment. There is a significant virtuous cycle impact here-the greater the use of Axon 2.0, the more data is collected. More data improves the accuracy of predictions, raising the ROAS for customers, and they increase their spend on Axon 2.0. That is why AppLovin has been able to achieve such startling growth combined with extraordinary margins.Unity began its life offering a set of software tools to create sophisticated games. It was a pioneer in providing game creators with the tools they needed to create 3D games, and that was the focus of the company. It held a successful IPO in a bit more than 4 years ago. A logical evolution was the development of a set of what are called mediation tools which the game developers could use to monetize their creations.This was the foundation of Unity’s own in-game advertising product-the segment of its business that it calls “Grow.” Initially, Grow was very successful and was a leading vendor in the space, leveraging its position with Unity’s community of game creators. For a time, it was market leading and growing more rapidly than AppLovin.At the start of 2022, the efficacy of Grow’s algorithms saw an unexpected decline. It turned out that some of its algorithms had been corrupted and were not forecasting properly. In addition, the company discovered an error in its data collection technology which also crippled the efficacy of the solution. Needless to say this led to a decline in Grow revenues.In the summer of that year, Unity announced its intention to acquire an Israeli-based company called ironSource. ironSource probably had the industry-leading market share of the in-game advertising space at that time and had been growing rapidly. The merger process was attended with some drama as AppLovin, at that point, tried to merge with Unity on condition that Unity abandon its transaction to acquire ironSource.Ultimately, the AppLovin proposal was rejected and in November 2022, Unity acquired ironSource. The merger did not go well. There was a botched integration of ironSource into Unity Ads. Then the ironSource senior managers all departed Unity. Subsequently, there may have been an effort by ironSource middle managers to bully Unity staffers into resigning. ironSource and AppLovin had been existential competitors. That meant that the ironSource style was far more aggressive and clashed with Unity’s culture. I have linked here to an article that purports to provide an insight into the problems at the Unity Grow division. It is not pretty reading, and one has to be careful to try to disentangle the wheat from the chaff: fired or bullied employees are often less than objective in their evaluation. Many of the bullied or fired employees were ones who had apparently let the Unity mediation technology get stale and uncompetitive.Where is Unity Grow at this point?Unity is a tale of two businesses. I have started this article looking at Grow-both because it is larger but also because it is the segment that competes with AppLovin and which perhaps has the potential to achieve some of the success that AppLovin has had with Axon 2.0.Unity Growth is actually the larger of the two revenue streams at Unity today. Last quarter its revenues were $298 million, down 5% year over year, but up by 1% sequentially Overall, Grow was 69% of total revenues. Obviously, at least some of the critique in the linked article above is a significant exaggeration, given that sequential revenues actually grew, albeit modestly. Just how much of the article represents the state of affairs within Unity Grow is difficult for me to determine as an outsider. Cultural clashes are never pretty, but are often necessary. A new management was never going to permit Grow to remain stuck in neutral.Grow revenues reached $253 million in Q4-2022. In the immediate wake of the purchase of ironSource, Grow revenues were $344 million. Overall, Grow revenues have declined about 26% over the last two years. Over the same span, AppLovin software platform revenues have risen from $306 million to $835 million, essentially a function of the performance of the Axon platform in creating superior ROAS for customers.Unity has a somewhat different vision of its go-to-market strategy for Grow when compared to AppLovin.Finally, we talked last quarter about embarking on a fundamental rebuild of our machine learning stack and data infrastructure designed to enhance the return on investment we’re able to deliver to our advertising customers. We’re happy to report great progress on that work, which is already in testing on live data. We’re very encouraged by the early results we’re seeing. We believe that our new data platform will not only drive performance improvements in user acquisition and monetization, but also surface insights critical to game production and live service management, where understanding consumer behavior is core to being able to build and operate great games. These investments are core to our vision of a unified platform that can deliver for our customers across the full lifecycle of game development.This strategy comes from the playbook that has marked Unity’s vision in this space almost from the start of it creating its Grow business. As can be seen from the above quote from the company’s most recent shareholder letter, Unity sees in-game advertising as an integral component of …well, a unified strategy that goes from game creation to monetization.We're the only company in the world capable of providing a platform to power the entire development cycle from prototyping through live service management to user acquisition and monetization.That is quite different from what AppLovin is currently doing; while it still has games that it has created, it does not offer game creation tools and its gaming business is a cash cow, and not really a part of its go-forward strategy.According to the company, despite the revenue decline of the Grow business, Unity’s customer base has not migrated to other in-game advertising solutions. What has happened, at least according to the management, is that because of the relative lower level of ROAS from the existing Unity platform, its users have moderated their spending for the in-game ads available on that platform, but haven’t deserted as customers either. I really have no way of validating the assertion.Like most anything else in the gestation process, evaluating the probability of success for is more of a guess than anything else. It has just been 15 months since Axon 2.0 was launched. At the time of the launch, some analysts were skeptics. I am linking here to an article which highlights some of the skepticism at that time.This is not intended to deprecate the skills of the mentioned analysts. As it happens, the Benchmark analyst mentioned in the article still has a sell rating on APP shares. The fact is, that when a product such as this is launched, many analysts will be skeptical and others will be more optimistic, and there simply will not be enough information to make much more than a guess.At the end of the day, it is all about efficacy. The buyers of ads are looking for quantifiable results. If the results are there, then there is a high probability that users will increase their investments on ad spending through the platform. I think management is very well aware of this. For the most part, developing this is a tedious and iterative process, but one that technology has made very doable over time.Management has made the assertion that because it offers both creation and monetization tools, it is in a position to offer unique insights.And as I said again, in in the opening statements, we think we are in a unique spot with respect to being the only company we believe in the world, that can sit as a platform through the entire lifecycle of development, from prototyping through to operating live service, and into monetization and advertising in UA. And those insights that we glean from being a platform, we can share those with our customers, and fundamentally offer insights that we think over time that no one else can. And to your point, we've got work, to do that. But we know what the work is and its work that's doable. And we're excited about it. And we're seeing, we're seeing, and feeling the wind at our back from, from the perspective of Unity how customers are responding, and some of the early results of the investments we're making. So this is an -- it's a business that we really couldn't be more excited to be in.It seems like a reasonable assertion, but again, at this point, it is difficult to validate. The CEO talked about the fact that game monetization is not necessarily a winner-take-all market.Game monetization will not be a winner to take all market. I can tell you for certain from personal experience that customers don't desire that outcome.I think that is highly likely.The company hopes to replace its old solutions by the end of calendar Q1 or in Q2. Is a buy recommendation premature here? The opportunity to emulate some, if not all of AppLovin’s explosive growth probably will not start until the summer of next year. While I am a long-term investor, I recognize that not all readers will want to wait on that long to see any validation of a thesis. But, as it turns out, that is not necessary. The company’s other business, Create, has had some new initiatives and those initiatives have the potential to move the CAGR needle in the immediate future.Unity’s Create business: There’s a lot new, including a 6.0 release, a pricing change, and the issue of using AI as a game development tool.Unity’s Create Solutions revenue last quarter was $132 million, up 5% year-on-year and 2% sequentially. At this point, Create is 31% of Unity's total revenues.Unity 6 was announced for general availability last month. It should be noted that the company’s new CEO, Matt Bromberg, is an erstwhile game developer/game entrepreneur, and is apparently intimately familiar with the specifics of what features and functions creators need and crave. Some of the features will be familiar to developers and only developers. Others are universally understood. One of those is performance enhancements based on optimizations. Another is something called a GPU Resident Drawer. Overall, the company has cited a more than 2X improvement in the performance of its new offering. There are many other new features which probably resonate more with game developers than anyone else and are of less interest to many investors.At least as important as the new product itself was the repeal of run time fees. It was about a year ago when the company announced a significant pricing change by instituting runtime fee for the development of new games. This was enormously unpopular with many users and had crippled Unity’s ability to grow. It led to market share losses and immense customer dissatisfaction.So if you didn't want to pay the new prices, all you have to do is not upgrade. That obviously was not a great dynamic from our perspective. So in addition to the sort of relationship elements and changing fundamentally how we're talking to customers, there was also a really enormous practical impact in which, for example, at our Unite conference in Barcelona, where literally, 50 customers came up and said, hey I had said I told everybody internally no upgrade in Unity 6 and now that we've -- you've repealed it and you reverted to the subscription, we're a green light.So those dynamics change real radically.While the company did eliminate run time fees, it has instituted price increases. Typically, these increases play out over some time and they should be a significant tailwind over the course of 2025.Another investment issue regarding Unity’s Create business has been that of genAI. Simply put, the question has been if the use of genAI can eliminate or reduce the need to use Unity, or any other set of tools, to create modern games. It is a more complex question than might be imagined. AI has been used for some time now as a part of the overall game creation process. It makes the process more efficient and speeds up the time to deliver a new game. The new CEO provided some insights into his perspectives on the issue: not terribly surprisingly it was anodyne and generic. Most likely the process of integrating genAI into the game creation process will be more incremental than existential.The CAGR estimates for game creation software overall range between 5% and 11% depending on which analysis is used. For many years, prior to the recent upsets, Unity Create had a CAGR many times that level because of its technology. The guidance this company provided on its latest call was sparse, both because of caution surrounding the cadence of a turnaround, and also because the CFO is interim, and will soon revert to a different role. Further, headline numbers still reflect the impact of Unity’s exit from non-core businesses.Revenues last quarter from the company’s core business components were $429 million. That compares to the prior forecast of $415-$420 million. The company increased full-year guidance by more than $50 million at the mid-point, suggesting some growth acceleration in its Create business in Q4. Understandably, in the midst of what is an existential product transition, it is not expecting Q4 will see any growth in its Grow business segment. Current published expectations for this current quarter are for revenues of $433 million. Published expectations for 2025 are for revenue growth of just 2%. After all that has gone on at Unity over the past couple of years, forecasts should and do err on the side of extreme caution. There are more than a few unknowns that need to be considered and evaluated in establishing forecasts for this company at this time.My own estimate for 2025 revenue is $1.92 billion, compared to the published consensus of $1.82 billion. It all depends on just how successful the turnaround is, and particularly if the Grow segment of the business can …well, start to grow itself when its new technology replaces the current flawed version being offered.Unity’s competitionThere are many vendors offering game development software. I have linked here to the Gartner listing of competitors; it isn’t particularly useful. I have also linked to both the Reddit and the Quora threads.None of the analysis presented here is really relevant. Unity 6 is just now available, and it wasn’t available at the time these threads were compiled. And these threads were compiled prior to Unity rescinding its run time fees. Further, the appointment of a new CEO who has been a game developer and is intimately familiar with that culture and is able to understand and act on developer concerns is a factor that is likely to change the competitive calculus.Unity has lost a significant amount of user goodwill, although its market share loss, if any, is less clear. It can take time to reestablish favorable vibes in the developer community. I expect with the new products that have been introduced, coupled with a management that is likely to be perceived as developer friendly and concerned, market share gains are likely - although not all at once.With regard to Unity’s Grow segment, its competitor is AppLovin. If the technology that Unity ultimately brings to market can produce ROAS equal to or greater than that which AppLovin is currently providing its users, it will see substantial growth-far greater than anyone-and that includes this writer-is willing to currently forecast.I don’t think there is any secret as to what has to be done. As the CEO said on the recent conference call, it is an iterative process. If the integration of game creation and game monetization winds up actually producing a better ROAS, then the opportunity is enormous, and particularly so given the current intense skepticism that Unity will actually become a significant competitor to AppLovin. All things considered, it is one of the better bets available in the enterprise software space, but competing against AppLovin at this point is a high bar-although not really insurmountable.Unity’s Business Model-What it will be is a function of how successful its Grow initiative is.Invariably, at this point in writing an article, I like to discuss the details of a company’s business model. That is what I am trained to do. In this case, discussing the details of the latest quarter are really not totally relevant. I am recommending Unity shares because I believe that the company’s efforts to reinvent itself have a reasonable probability of success. In particular, I think that the opportunity it has to become a realistic alternative to AppLovin within the in-game advertising space is significant and as yet under-appreciated. That is relevant because the margins that APP has achieved in that business are so substantial.Last quarter, AppLovin’s adjusted EBITDA margin in its software platform segment was 79%! The company’s overall free cash flow margin, which includes its margin on the games that it has created and published, was 45%. I do not wish to suggest that Unity will achieve these kinds of margins in the near future. But I present AppLovin’s most recent results simply to show what is possible.In this most recent quarter, Unity’s adjusted gross margin was 84%. The other cost ratios are elevated as the company will have to scale revenues to support its current infrastructure. Non-GAAP research and development expense was 29% compared to 27% in the year earlier period. Sales and marketing were 24% up by 400 bps year-on-year. Non-GAAP general and administrative expense, declined by 25% in dollars, and that was enough to hold the expense ratio steady at 10%.Overall, while the GAAP net loss margin was 28%, the company’s adjusted EBITDA margin was positive 21%. The company has been able to remain free cash flow positive. Much of its net loss has to do with its relatively substantial depreciation and amortization provision, which most recently was 24% of revenues. As capex is less than 2% of revenue, and stock-based comp. is 24% of revenues, the company, despite its current state, has been able to achieve free cash flow margin of 27%.What the business model might look like is entirely a function of how the company’s efforts to undo past errors and to develop an app monetization offering that can produce a strong level of ROAS for users evolves. Unity, like APP, has the potential to be very profitable, but it is all a function of the company’s product initiatives.Risks to the investment thesis.This is a turnaround. And inherently, that makes the investment thesis risky. I don’t know the statistics-but my guess is that more turnarounds don’t achieve their full promise than those that do. There really are no secrets about the risks to this thesis.Unity has to be able to offer an in-game advertising solution that produces a very high ROAS-at least equivalent to what the ROAS has been for AppLovin’s Axon 2.0. Without the ability to offer that, the company will not be able to capture the potential growth is this, its major revenue segment.The company has rescinded its run-time charge. The issue, of course is, will the developer user community return and choose to upgrade to Unity 6.0. The price/performance advantages are there and so, too, are the functional improvements. But there are lots of customers who have become conspicuously unhappy by the aborted pricing change. Will they return as enthusiastic Unity customers? Will they upgrade? Will they accelerate their game creation efforts on the Unity platform?The gaming business has been cyclical. It saw exceptional growth during the period of the pandemic, when users reached a high point in terms of their engagement as other forms of recreation were severely circumscribed. Subsequently, as user engagement returned to more normal levels, the growth of the gaming business slowed. The overall environment has shown some improvements, but certainly should macro conditions deteriorate, this would impact Unity-it still has a 70% market share according to analysts for game creation tools.I think management chose the right individual to turn this around-at least based on his public pronouncements. He says the right things, and he is certainly on a mission to prove his ability to run a large game creation and monetization vendor. But the tasks ahead are non-trivial and require lots of execution and some luck as well. Those are the risks to the thesis.Wrapping up-The case to buy Unity shares nowThe case to buy Unity shares is a bet on its potential turnaround. In particular, the thesis relates to the potential for Unity Grow, which has embarked on a complete revamp of its in-game advertising platform, to mimic some of the success that AppLovin has had with Axon 2.0. Management is well aware of what is needed to launch a successful offering in this space, and it is well along in terms of developing the appropriate technology for users. It is a tedious, iterative process, but it is the only way to ensure that users will get at least the level of ROAS that they are expecting.In addition, the company has rescinded the toxic run time fees that were misguidedly instituted by the prior CEO. And it has launched a new generation of its gaming engine with substantial price/performance improvements as well as significant improvement in graphics capabilities. The new CEO has a lengthy experience in the gaming industry, both as a developer and as the operator of a good-sized vendor. He seems likely to be able to restore Unity’s reputation in the space.Because this is a turn-around, precise quantification of the potential is not really possible. Whatever a prudent guess might be, it would be substantially bettered if the strategy works-and if the strategy doesn’t work, the investment won’t be saved by attractive valuation metrics-which, after all, are as much retrospective as prospective. Based on a revenue forecast that in no way reflects the potential for a turnaround, or one that starts to achieve results in 2025, my estimate of the EV/S ratio is a bit greater than 6X. But the reality is that if the turnaround works, that ratio would, perhaps, be 4X on 2026 revenues, and with a free cash flow margin that could easily top 40% as it is currently 24% without any positive impacts from new products.Over the course of writing this article, over the past week-just a few days really, Unity shares have appreciated 31%. Some of this is apparently a rumor that Microsoft might be interested in making a bid to acquire the company. I, personally, don’t quite see the logic of that transaction and whether I did or not, it would probably receive antitrust objections. I would not recommend Unity shares because of a potential merger-if it were to happen it would be lagniappe, at least for me.Also, recently, Cathy Wood’s ARK Innovation ETF sold $48 million of Unity shares after the company reported its most recent quarter.High-growth IT stocks have staged an impressive rally this week. A benchmark ETF, the IGV has rose by nearly 5% Investor seem of a “risk-on mindset. Speculating on the success of Unity’s turnaround is congruent with that mindset. I am not trying to opine here with regard to how investors should allocate portfolio resources to risk-on positions. Some readers will doubtless be concerned about the sharp rally in high-growth IT shares in the few weeks since the election. That is obviously a different subject than what I have tried to write about in this article.I believe that the risk/rewards of investing in Unity shares are quite compelling and that remains the case after the spike in valuation of the last few days. There is really room for another monetization engine in the in-games advertising space, and my belief is that Unity has a reasonable chance to be that alternative. I think the odds favor Unity shares achieving positive alpha over the next year and beyond.","news_type":1},"isVote":1,"tweetType":1,"viewCount":11,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0}],"lives":[]}