Electronic Arts Inc: A Plan to Take Out Fortnite That Could Return Big Gains

Electronic Arts’ New Battle Plan Could Lessen Fortnite 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 battling to win a 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, 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, which is grappling with revenues as the company loses interest to Fortnite.

Consider that EA stock was trading at $151.26 only a 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 ever recover its glory days, the company will need to adapt to innovative ways of attracting online gamers.

Electronic Arts 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, Apex Legends continues to garnish about eight- to 10-million players each week.

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

EA Stock Could Break $100.00 and Extend Rally

The chart shows EA stock drifting sideways in a channel since January.

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

Chart courtesy of StockCharts.com

A sustained breakout could drive EA stock towards resistance at $107 and $118.50 with an end goal of recovering its $151 high.

Analyst Take

Much of what happens to EA will be dependent on the success of its established games and its ability to grow interest.

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