Electronic Arts Inc’s Plan to Take Out Fortnite Could Return Big Gains

Electronic Arts Inc Besting Fortnite Could Return Big Gains
iStock.com/Koonsiri Boonnak

Electronic Arts Inc’s New Battle Plan Could Lessen Fortnite’s Impact

It was staggering to watch some of action from the recent Fortnite World Cup, where tens of millions of players battled it out to make the final cut of 100 players competing to win part of the $30.0 million in prizes.

I’m pretty sure the viewers included the folks at Electronic Arts Inc. (NASDAQ:EA), a premier gaming company negatively impacted by the insidious success of Fortnite.

Since debuting only a few years ago in 2017, Fortnite, developed by privately held Epic Games, Inc., has achieved a phenomenal cult following of over 125 million online players.

The free online game in the battle royale genre has hurt the traditional legacy gaming sector, including Electronic Arts Inc., which is grappling with its revenue as the company loses interest to Fortnite.

Consider that EA stock was trading at $151.26 only about year ago, in July 2018. The tide has turned, as Electronic Arts stock plummeted to $73.91 during the December sell-off prior to rallying to the current $95.00 level.

But for Electronic Arts  to recover its glory days, the company will need to adopt innovative ways of attracting online gamers. The company has a successful license for FIFA, but the company will need to do a lot more.

In a defensive strategy, EA launched its own version of a free online battle royale game called Apex Legends in February.

Apex Legends started with a bang, attracting about 50 million players by March, but the momentum faded in the subsequent months. While the fading numbers are disappointing for Electronic Arts Inc., Apex Legends continues to garner about eight to 10 million players each week.

EA clearly has the right idea and it recently launched the next installment of Apex Legends. It will be interesting to see what the numbers will be.

EA Stock Could Break $100 and Extend Rally

The below chart shows Electronic Arts stock drifting sideways in a channel since January.

If EA stock can hold above $90.00, there could be a breakout attempt at $100.00, representing channel resistance. The downside risk is $85.00.

Chart courtesy of StockCharts.com

A sustained breakout could drive EA stock toward resistance at $107.00 and $118.50, with an end goal of recovering its $151.00 high.

Analyst Take

Much of what happens to Electronic Arts stock is dependent on the success of the company’s established games and its ability to grow interest among gamers.

It will not be easy, given the incredible momentum of Fortnite, but if Electronic Arts Inc. can grow Apex Legends and perhaps other titles, there is a chance that EA stock will rally toward its high.