"Citing data from his company's 2Q mobile game ad tech survey, Thill said "overall 2025 ad spend expectations improved off of April" and are now on course for nearly 4% year-over-year growth."
"Unity does generate substantial positive free cash flow -- $308 million over the last 12 months. On a $14 billion stock, that works out to a 45x price-to-free-cash-flow valuation."
"Analysts polled by S&P Global Market Intelligence forecast Unity will more than triple its free cash flow (FCF) over the next five years to nearly $1 billion in 2030."
"Still, going from $308 million to just under $1 billion in five years works out to only a 26% annualized FCF growth rate. I'd prefer to see that go higher to justify the stock's 45x FCF valuation."
Unity Software has seen a significant share price increase after a price target raise by Jefferies analyst Brent Thill to $35, based on improved 2025 ad spend expectations. The firm reported Unity's annual free cash flow at $308 million, translating to a 45x price-to-free-cash-flow ratio on a $14 billion market cap. Analysts anticipate a tripling of this cash flow over five years, approaching $1 billion by 2030. Despite the attractive growth forecasts, questions remain regarding the valuation and the necessary growth rate justification.
Read at The Motley Fool
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