Unity Software (U) reported Q4 advertising growth that fell short of investor expectations, despite beating overall financial estimates, Morgan Stanley's research division said in a note to clients Thursday.

Analysts said they remain "constructive" on Unity's longer-term outlook, citing continued momentum in Vector, the planned Q2 runtime launch of data tools aimed at improving "ad targeting," and a potential commerce rollout that could provide upside to earnings.

Unity's Vector ad platform grew at a "mid teens" sequential rate for a third straight quarter, but declines at its ironSource were a "larger than expected drag," offsetting Vector's gains and weighing on the broader Grow segment, Morgan Stanley said.

Morgan Stanley maintained an overweight rating on Unity Software, but lowered its price target to $30 from $52.

Shares of the company were down nearly 8% in recent Thursday trading.

Price: 20.23, Change: -1.18, Percent Change: -5.51