Shares of Electronic Arts (EA) surged in morning trading, rebounding from sharp losses earlier in the week, after a unit of the game publisher said that "Apex Legends," the company's free-to-play battle royale shooter that launched on Monday, has already been played by over 10M people. "Apex Legends" is available on PC, PlayStation 4 (SNE), and Xbox One (MSFT).
WHAT'S NEW: In a blog post, Vince Zampella, CEO of EA's Respawn, said that over 10M players have played "Apex Legends" and that the title has breached 1M concurrent players. The game, which takes place in EA's "Titanfall" universe, was formally unveiled on Monday in a series of livestreams, with developer Respawn saying that the game "shakes up the battle royale genre with a cast of unique characters, squad-based gameplay, innovative mechanics and more." The title follows a free-to-play model, much like Epic's "Fortnite," where the base game is free to download but players can purchase other in-game items and services, including cosmetic options. Investors in Epic include Tencent (TCEHY), KKR (KKR), and Disney (DIS).
EARNINGS: A day after announcing "Apex Legends," EA reported lower-than-expected earnings and net bookings for the third quarter, provided downbeat guidance for the fourth quarter, and cut its net bookings guidance for fiscal 2019, causing its stock to plummet as CEO Andrew Wilson said that Q3 was a "difficult" quarter. Of note, the company said on its quarterly conference call that, while its recent shooter "Battlefield V" failed to meet expectations, it is "doubling down" on live services games and has "big plans" for "Apex Legends."
STREET RESEARCH: In a research note to investors, Buckingham analyst Matthew Harrigan maintained a Buy rating and $90 price target on Electronic Arts, noting that while the current player numbers for "Apex Legends" are "dwarfed" by "Fortnite," the EA game actually reached these levels faster than "Fortnite" initially did. Harrigan said that big trading reaction exemplifies how "hit driven" video gaming stocks remain and added that "Apex Legends" has been leading Twitch (AMZN) viewing figures since launch.
Meanwhile, Baird analyst Colin Sebastian backed his Outperform rating and $90 price target on Electronic Arts, saying that early engagement with "Apex Legends" appears impressive, and player feedback seems "largely positive." The analyst said that he sees potential for upside if user growth and monetization trends can maintain the game's early momentum. In addition, Sebastian said he believes the success of "Apex Legends" could fuel increased interest in this year's upcoming "Titanfall" sequel.
WHAT'S NOTABLE: While "Apex Legends" has drawn a great deal of attention and interest from players, EA's next major online live service game "Anthem" releases later this month. The company said on its recent quarterly call that it is modeling 5M-6M unit sales for "Anthem" by the end of March and that it was "very pleased" with player engagement from recent demos of the game.
Before EA reported earnings, however, Stephens analyst Jeff Cohen told The Fly in an exclusive interview that "Anthem" will be "very important" for the future of EA, considering the "big investment" made in the title. "The way I’ve been framing 'Anthem' is that it could be a positive catalyst that could improve the sentiment around EA," Cohen said. "Because I think the perception around EA in the past year and a half has been one of a lot of execution struggles. So, I do think it’s important that they have a clean release.”
PRICE ACTION: In late morning trading, EA shares are up 13% to $95.07.
