This is another ticker I’m adding to my watch list. Unity (U) is a company that, according to the Yahoo company description, “operates a platform that provides real-time 3D content and experiences. Its platform provides artificial intelligence solutions that support creators in building, running, and growing immersive, real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices.”
They began operating in 2020 and are a decent sized company with over 6k employees. But they have negative earnings and average to high debt. I took a look at their financials and there is nothing else eye-popping there. I do see that QoQ and YoY they are trying to increase their cash position. This issued very little long-term debt this past year, but I imagine if things don’t improve, they’ll be forced to issue more or to issue more stock, both of which are bad news for investors. The majority of the investors are institutional at 71%. I suppose because it is not involved directly with AI and so if it can’t be part of the AI movement, then money will likely move out of this consistent money loser into bigger names.
Anyways, I’ve never been top-notch at reading fundamentals or making predictions on the future of how businesses will actually interact and innovate. I’m more interested in the chart itself to see the behavior of investors. While this managed to bounce hard off the $25 level several times, these were due to tech bubble/Metaverse hypes. Interestingly (perhaps not shockingly) it has not really bounced in the AI hype.
In terms of strategy, I’m obviously bearish and looking for the break beneath $25.
However, I’m bearish enough to try getting into position now as I believe a) the market has topped in the intermediate term, and this (amongst other weak stocks) will be the first to really dump and b) Earnings are scheduled for May 9 which I could see being a catalyst for a big move down. So, I’m going to buy some OOM puts with Expiry after earnings. If earnings work against me and pop, well then, the delta is smaller on OOM puts so I lose less than if I outright short and minimize my loss. If it collapses big then hey, I’m a genius and make an outsized return. If it is a big nothing burger, I’ll likely roll it out to further dates this year as I think this will break eventually and aim for single digits.
