Unity Software: Stock Price Jumps After Pricing Model Announcement

Initially, Unity Software's shares seemed to decline slightly on Thursday. However, shortly before midday, the stock price shot up dramatically as the company announced significant changes to its pricing model. By 2:30 PM, Unity's stock had increased by approximately 12%. Unity's software is used by numerous clients to develop and monetize mobile games. Until now, the company has offered its services on a subscription basis, with varying prices for different usage tiers. However, former CEO John Riccitiello introduced a 'runtime fee' last year, which was charged for every game download – a move that proved disastrous and ultimately led to the search for a new CEO. The new CEO, Matt Bromberg, announced today that the runtime fee will be completely abolished. Bromberg acknowledged that price increases are necessary, but they need not be implemented in a controversial manner. Given the widespread criticism of the runtime fee, investors welcomed its elimination. Nonetheless, Unity is serious about price increases. Subscription prices will rise by 8% to 25% depending on the package, taking effect on January 1. Investors can thus expect a revenue increase and hopefully improved profit margins. However, some uncertainty remains: the company might lose customers due to the many price changes in a short period, which could diminish the anticipated financial gains. Much could also depend on the latest version of Unity's software: Unity 6. The release is expected before the end of the year. If it sufficiently differentiates itself from the competition, developers might subscribe despite the ongoing frustrations with the runtime fee. Before investing in Unity Software, consider the following: The analyst team at Motley Fool Stock Advisor has just identified ten stocks they consider the best investment opportunities right now – Unity Software is not one of them. The ten selected stocks could generate massive returns in the coming years. For example, on April 15, 2005, Nvidia was added to this list. An investment of $1,000 at that time would have multiplied to an impressive $716,375.* Stock Advisor provides investors with an easy-to-understand success strategy, regular updates from analysts, and two new stock recommendations monthly. Since 2002, the Stock Advisor service has more than quadrupled the S&P 500's returns.* Jon Quast holds no position in the mentioned stocks. The Motley Fool owns and recommends positions in Unity Software. The Motley Fool has a disclosure policy.