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Unity's stock sheds 15% after disappointing earnings

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Re: Unity's stock sheds 15% after disappointing earnings

#21

Post by icegreentea2 »

I expect Unity's stock price will continue to drop for a while. It's my opinion that the adjustments that Unity made (layoffs and the engine license changed) were not just about "pumping the share price". Unity's financials were simply mid to long-term unsustainable - they were spending much more than they were making.

Unity is probably overvalued, and if its plans to reshape itself into a viable long-term business, it'll probably have to eat a bunch of share price drops.

Taking a quick peek at the Q4 shareholder letter, it doesn't really look like any of their belt tightening has really taken hold yet. 2023 Q4 has broadly similar operating expenses (R&D, S&M and G&A) as 2022 Q4. 2023 Q4 revenue barely up when you exclude the one time WETA release. Overall, Unity is still very much in the red.

2024 will be interesting to see.

Re: Unity's stock sheds 15% after disappointing earnings

#22

Post by hx8 »

chongli wrote: post #12
frfl wrote: post #8

Earlier quoted context omitted.

From Wikipedia, > Software developer Niantic released Pokémon Go, which was built using Unity engine, in 2016.[26] Following the success of Pokémon Go, Unity Technologies held several rounds of funding that increased the company's valuation: In July 2016, a $181 million round of funding valued the company at approximately $1.5 billion;[26] in May 2017, the company raised $400 million that valued the company at $2.8 b…

I would love to know what sort of pitch they made to bring in that amount of capital. There seems to have been no business plan whatsoever besides enshittify to the max and alienate customers with ham-fisted retroactive cash grabs.

Video Games are one of the most potent attractions for peoples attention. In 2008 the whole industry was worth $12B. In 2010 it grew to $25B. It would have been easy to sell continued growth in 2016 because the industry actually did continue to grow to no one's surprise. $191B in 2021. Investing in the industry at the time would have been smart.

Unity sells shovels in a gold rush. In 2016 Unity was known for being easier than the competition while having fantastic multiplatform/mobile support. They were positioned to take a tax on games sold on every major platform. It's almost impressive how badly they ruined such a winning hand.

Among Us, Pokemon Go, Beat Saber, Genshin Impact, Hearthstone, Rust were all made in Unity.

Re: Unity's stock sheds 15% after disappointing earnings

#23

Post by TillE »

icegreentea2 wrote: post #21

I expect Unity's stock price will continue to drop for a while. It's my opinion that the adjustments that Unity made (layoffs and the engine license changed) were not just about "pumping the share price". Unity's financials were simply mid to long-term unsustainable - they were spending much more than they were making. Unity is probably overvalued, and if its plans to reshape itself into a viable long-term business,…

Cutting expenditures means falling ever further behind Unreal Engine in the long term. Fundamentally I don't think it's a viable business as such, there are too many competitors who don't need to turn a profit solely on their game engine product.

I really hope they get acquired sooner rather than later, before they pivot to a stripped-down mobile-only engine or something.

Re: Unity's stock sheds 15% after disappointing earnings

#24

Post by suddenclarity »

TillE wrote: post #23
icegreentea2 wrote: post #21

I expect Unity's stock price will continue to drop for a while. It's my opinion that the adjustments that Unity made (layoffs and the engine license changed) were not just about "pumping the share price". Unity's financials were simply mid to long-term unsustainable - they were spending much more than they were making. Unity is probably overvalued, and if its plans to reshape itself into a viable long-term business,…

Cutting expenditures means falling ever further behind Unreal Engine in the long term. Fundamentally I don't think it's a viable business as such, there are too many competitors who don't need to turn a profit solely on their game engine product. I really hope they get acquired sooner rather than later, before they pivot to a stripped-down mobile-only engine or something.

That's based on the assumption that every employee contributed to improving the game engine. They went from 2700 to 7700 employees during the pandemic. They could fire the bottom half of those people and still be way ahead where they were a few years ago.

As a hobby game dev using Unity, there are plenty of issues with it. But I doubt hiring more people and throwing more money on it will solve them at this stage.

Re: Unity's stock sheds 15% after disappointing earnings

#25

Post by programmarchy »

bmitc wrote: post #11
programmarchy wrote: post #7

Earlier quoted context omitted.

Yes, Apple could bail them out. They might need to because, judging by recent WWDCs, they’ve already placed bets on Unity as the game engine of choice for Apple Vision Pro.

There is zero chance Apple would buy Unity. One programs and scripts in C# and an outdated version of .NET via Mono.

Dunno, maybe you're right. I agree the technology choice is very bizarre, but have you noticed the emphasis on Unity in the last two WWDCs? It's clearly the game engine currently "blessed" by Apple.

I think there's a confluence of factors driving this. Foremost, they need a way for developers to make games, especially in the AR/VR space. SpriteKit and SceneKit have floundered, and RealityKit is not a complete solution to make games, let alone cross-platform games. They can't show any favor to Unreal Engine, even though it's superior, because of their fight with Epic. I wish they would invest more in something like Godot, but Unity has more marketshare (for now).

C# is a great language, and Apple is pragmatic enough to realize the cross-platform potential is much greater than Swift's. From what I've seen, Swift has little traction as a cross-platform tool compared to Mono. Lattner's departure took some wind out of the Swift sails, too.

Re: Unity's stock sheds 15% after disappointing earnings

#26

Post by paulddraper »

datavirtue wrote: post #6

Is there any possible redemption for a publicly traded company that is on their back foot like this? Seems like this would have been a stellar business without the hassle of going public. How did they fuck this up? All they had to do was keep customers happy and collect money.

? They've not been profitable idk what you're talking about

Re: Unity's stock sheds 15% after disappointing earnings

#27

Post by programmarchy »

refulgentis wrote: post #9
programmarchy wrote: post #7

Earlier quoted context omitted.

Yes, Apple could bail them out. They might need to because, judging by recent WWDCs, they’ve already placed bets on Unity as the game engine of choice for Apple Vision Pro.

After 20 years of thinking "Apple is taking gaming seriously this time!" every 3 years, then getting __excruciatingly__ burned, I've given up. They'll build it before they buy it.

Based on how they've backed off SpriteKit and SceneKit, I really don't think they will try to build a game engine. Bringing on the big game developers requires a cross-platform engine. Like Unity, one that can target Nintendo Switch, Xbox, Playstation, etc. Any money they pour into an effort like that would cannibalize sales on their own devices.

Re: Unity's stock sheds 15% after disappointing earnings

#28

Post by ffgjgf1 »

TillE wrote: post #23
icegreentea2 wrote: post #21

I expect Unity's stock price will continue to drop for a while. It's my opinion that the adjustments that Unity made (layoffs and the engine license changed) were not just about "pumping the share price". Unity's financials were simply mid to long-term unsustainable - they were spending much more than they were making. Unity is probably overvalued, and if its plans to reshape itself into a viable long-term business,…

Cutting expenditures means falling ever further behind Unreal Engine in the long term. Fundamentally I don't think it's a viable business as such, there are too many competitors who don't need to turn a profit solely on their game engine product. I really hope they get acquired sooner rather than later, before they pivot to a stripped-down mobile-only engine or something.

To be fair Unity had/has a bunch of other businesses unrelated or marginally related to the engine itself. They went on a spending spree during 2020 and 21 buying random companies left and right.

Seems like they are mainly focusing on cutting that.

Re: Unity's stock sheds 15% after disappointing earnings

#29

Post by ffgjgf1 »

datavirtue wrote: post #6

Is there any possible redemption for a publicly traded company that is on their back foot like this? Seems like this would have been a stellar business without the hassle of going public. How did they fuck this up? All they had to do was keep customers happy and collect money.

I’m not sure going public was the main issue. The barely thought out acquisitions and massive over hiring after 2020 were. If they were more conservative they’d probably already be profitable

Re: Unity's stock sheds 15% after disappointing earnings

#30

Post by ffgjgf1 »

danielmarkbruce wrote: post #20
gcampos wrote: post #18

Earlier quoted context omitted.

Unity was never profitable and was always dependent on vc money. For sure it's a great product, but the truth is that it was subsidized by vc capital and is not a sustainable business

It's slightly better than operating cashflow neutral. It's growing at a very healthy rate. It's definitely sustainable. The debate is around is it worth $5 billion or $50 billion. It's not as easy as one might think to figure which.

> slightly better than operating cashflow neutral

Only because they are issuing massive amounts of stock (IIRC ~15% per year) to pay their employees and not doing any buybacks. How sustainable is that?

> It's growing at a very healthy rate

The problem is that it’s not. YoY growth they reported yesterday was -2% and they are also guiding for negative growth next year.

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