Shares of Unity Software (U -2.33%) have taken a beating over the last few years. They're down 90% from their peak in 2021. But Wall Street analysts are generally bullish on the company's turnaround prospects.

JMP Securities analyst Andrew Boone recently upgraded the stock to outperform (buy) with a $30 price target, implying 36% upside over the current $21.95 share price. This is slightly higher than the average 12-month Wall Street price target of $28.95. Here's the question investors need to ask: Is there a catalyst that could improve the company's financial results to send the stock higher this year?

Is the stock a buy?

Unity has dealt with several challenges over the last year that have led to declining revenue. The company terminated its subscription agreement with computer animation company Weta FX, made changes to its product offering, and faced increasing competition in its advertising business.

While revenue fell 17% in 2024, fourth-quarter financial results were better than expected. Unity's new Unity Vector ad network, powered by artificial intelligence (AI), is anticipated to solidify its competitive position and boost its long-term growth prospects.

The launch of Unity's new graphics engine, Unity 6, is another catalyst to watch. Subscription revenue grew 15% year over year in the quarter, with Unity 6 being downloaded 2.8 million times since release. Unity also continues to make progress in expanding its business beyond gaming, with growing adoption across automotive and retail.

Still, analysts expect Unity's revenue to be down 2% this year before growing 10% in 2026. If the new ad network and game engine can help Unity return to growth this year, it's possible that the stock could climb back to the analyst's $30 price target.

However, management noted that it will take time for Unity Vector to show positive results for the business. A bigger issue is profitability. With analysts still expecting Unity to report losses on the bottom line this year, it's also possible that the stock may continue to underperform unless there is a significant acceleration in revenue growth.