Why Unity Software Stock Was Crumbling This Week

Over the past few days, stock market players seemed as if they were unified in bearishness about the prospects of Unity Software (NYSE:U). After all, the stock was down in price by more than 15% week to date as of early Friday morning, according to data compiled by S&P Global Market Intelligence. Two recent analyst moves played a role in the decline.

Analyst changes

During the week, no less than three pundits weighed in with updates on Unity. Although one was positive, it's clear the market took the more downbeat takes to heart.

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Before market open on Monday, influential Wells Fargo analyst Brian Fitzgerald cut his price target on Unity stock by $5 per share for a new level of $22. Despite the change, he maintained his existing recommendation of equal weight (hold, in other words).

The same day Macquarie's Aaron Lee upgraded his recommendation on Unity. While such a move would usually be a catalyst for a price pop, Lee's adjustment only shifted his view on the stock from underperform (sell) to neutral. At least he raised his price target on the shares, to $24 apiece from the preceding $16.

The only true Unity bull among the analysts making moves was JMP Securities analyst Andrew Boone, who now believes the stock should be tagged as an outperform (buy) with a $30 per share price target, replacing his previous market perform (hold) designation. According to reports, Boone believes the upcoming launch of the new Vector ad platform could capture market share for the company.

Watch the launches

Unity surely has much to prove with Vector, not to mention its other product launch (graphics engine Unity 6). To me, the former is the more tantalizing, as it harnesses artificial intelligence (AI) to do its work and such technology is in demand from all types of businesses. I wouldn't count this stock out yet, no matter how unpopular it's been recently.

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Wells Fargo is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Unity Software. The Motley Fool has a disclosure policy.