Unity Software (U) Ends Run as HSBC Downgrades Rating

We recently published 11 Stocks Failing to Keep up With The Market. Unity Software Inc. is one of the top performers on Tuesday.

Unity Software snapped a two-day winning streak on Tuesday, shedding 6.75 percent to close at $40.04 apiece as investors took path from a rating downgrade from an investment firm.

In a market note, HSBC revised its recommendation for Unity Software Inc. to “hold” from “buy” previously amid valuation concerns, having already jumped by nearly 100 percent year-to-date as compared with the S&P 100’s 15-percent gain.

“Growing investor confidence in the prospects of a successful turnaround in Unity’s operations under its new management has seen Unity’s share price +91% YTD (vs the S&P100 index +15%), now trading at c9.8x NTM sales, a 66% premium to its 2-year average, and implying an EV/26e sales multiple for its Grow segment of c9-12x,” HSBC said.

Albeit Unity Software Inc. was valued lower than its counterpart, AppLovin Corp., HSBC said that the latter has demonstrated a more superior growth and execution.

Despite the downgrade, HSBC still gave Unity Software Inc. a higher price target of $40.80 versus the $37.50 previously.

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This article is originally published at Insider Monkey.