Why Unity Stock Plunged Almost 27% Last Month

Shares of Unity Software (NYSE: U) plunged 26.5% in January, according to data provided by S&P Global Market Intelligence. To be fair, it wasn't a great month for the broader stock market either, with the S&P 500 down 5% for the month. However, Unity stock fell much further likely due to its lofty valuation. Pricy stocks like this have been selling off particularly hard ever since the Federal Reserve started making policy shifts.

In November 2021, Federal Reserve Chairman Jerome Powell gave a press conference and talked about how the government was tapering asset purchases, something it did to stabilize the stock market at the outset of the COVID-19 pandemic. In December, Powell said there may be interest rate hikes throughout 2022. These decisions have caused stocks with pricy valuations, like Unity, to pull back. For perspective, Unity stock still trades at a price-to-sales (P/S) ratio of around 30 -- you probably couldn't call this stock cheap unless it traded under a P/S ratio of 5 or even lower.

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Source Fool.com