Should Major Video Game Publishers Be Worried About Fortnite?

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Fortnite is the next big video game, there is no doubt about it. We’ve seen the rise and fall of Overwatch and then the rise of Player Unknown Battleground — better known as PUBG — but now Fortnite is taking the world by storm. And this could spell some problems for major video game publishers.

As recently as February, the firm Superdata noted that Fortnite generated an incredible $126 million in-app purchases. And for the first time, it pulled ahead of the competition from PUBG.

Fortnite also has received special attention from celebrities and athletes. The Pacer’s guard Lance Stephenson recently sported a pair of shoes referencing Fortnite in bright yellow letters. Even the rapper Drake streamed a game with famed Fortnite player Ninja, garnering even more popularity for the game.

With this incredible rise in popularity, other major video game publishers should be worried. Or at least they should be crafting their own Battle Royale sandbox game to not get totally pwned.

The boutique investment firm KeyBanc weighed in on Fortnite and how its popularity could have an influence on other video game firms. KeyBanc went so far to say that it expects this wildly popular game to negatively impact earnings for publishers Activision Blizzard Inc. (NASDAQ: ATVI), Electronic Arts Inc. (NASDAQ: EA) and Take-Two Interactive Software Inc. (NASDAQ: TTWO), based largely on proprietary survey results and credit-card data.

As a result, the firm is reducing its revenue and EPS estimates for all three, as it thinks Fortnite, made by closely held Epic Games, is siphoning away player engagement and spending in some of those companies’ biggest titles. Still, KeyBanc says it views recent stock declines for the trio as “a meaningful buying opportunity.” Activision, EA and Take-Two are slated to release their next earnings reports in early May.

Shares of Activision Blizzard traded down over 1% to $64.54 on Wednesday. The stock has a 52-week trading range of $48.41 to $79.63 and a consensus analyst price target of $76.58.

EA shares were last seen down about 2% at $117.31, with a consensus price target of $138.12 and a 52-week range of $87.94 to $131.13.

Take-Two was down 1% at $94.84 a share. The 52-week range is $57.36 to $129.25. The consensus price target is $131.15.