Unity Software Stock Skids Lower After Layoffs

Call volume is running at double the intraday average

Digital Content Manager
Jan 9, 2024 at 10:20 AM
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Unity Software Inc (NYSE:U) announced in a regulatory filing it will eliminate 1,800 jobs, or 25% of its employees, in its largest round of layoffs ever. The move is part of a "company reset" interim CEO Jim Whitehurst warned was coming back in November. At last glance, U was down 5.3% at $36.90, brushing off a price-target hike from Wedbush to $50 from $31.

Analysts are still hesitant toward U, with 11 of the 18 in question carrying a tepid "hold" or worse rating, while the 12-month consensus target price of $35.33 is a 5.2% discount to current levels.  

Options bulls are chiming in on the layoff announcement, with 9,658 calls traded so far -- double the intraday average volume -- compared to just 1,524 puts. Most popular is the February 40 call. 

These traders are in luck, as Unity Software stock sports attractively priced premiums. This is per its Schaeffer's Volatility Index (SVI) of 54% that sits higher than only 12% of readings from the past 12 months, indicating options traders are pricing in low volatility expectations.

The $36 region has provided a floor for U over the last few weeks, after its December rally came short of the $44 level, though it still marked its highest level since August. The 40-day moving average has been a reliable source of support over the past month, helping U to its 27.6% year-over-year lead.


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