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Video Game Stocks Continue To Trade Lower Following Launch Of 'Apex Legends' Season 2

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Video Game Stocks Continue To Trade Lower Following Launch Of 'Apex Legends' Season 2

After closing last week on a down note, video game stocks such as Electronic Arts (NASDAQ: EA), Activision Blizzard (NASDAQ: ATVI) and Take-Two Interactive (NASDAQ: TTWO) are seeing downward pressure in Monday's session.

Why The Move?

Needham’s analyst Laura Martin told Benzinga the disappointing launch of "Apex Legends" Season 2 is pulling other video game stocks down as it implies "Fortnite" is a "harder competitor to beat than originally thought."

"I think EA is down on the disappointing launch of 'Apex Legends' [Season] 2 on July 2, based on Twitch player data. It's pulling other public gaming cos [companies] down on this news because it implies that Fortnite (private) is a harder competitor to beat than originally thought," said Martin.

According to Digital Trends, "Apex Legends" Season 2 was supposed to take battle royale shooter to greater heights, but so far, it has failed to meet expectations as a worthy competitor to "Fortnite."

One analyst disagrees that "Apex Legends" Season 2 should be a cause for concern in the video gaming sector. Wedbush analyst Michael Pachter notes, “some think 'Apex Legends' is performing poorly because of lack of commentary from the company. I disagree, think it's doing just fine."

Longer-Term Issues?

BMO Capital Markets’ Gerrick Johnson told Benzinga video game stocks have been under pressure in general as gains from the digital transformation are either already harvested or occurring at a slower rate and notes “uncertainty and fundamental shifts” are behind the weakness.

"I think there is a longer conversation here. VG [video game] companies have been under pressure in general as gains from the digital transformation are either already harvested or occurring at a slower rate. But also some uncertainty and fundamental shifts,” said Johnson.

Johnson believes the popularity of free-to-play PC and console gains like "Fortnite" and "Apex Legends" have made the industry, once again, more hit driven.

At time of publication, Electronic Arts shares were trading down 1%, Activision Blizzard shares were down 3.5% and Take-Two shares were down 2.5%.

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Photo courtesy of Respawn Entertainment.

Latest Ratings for EA

DateFirmActionFromTo
Nov 2019MaintainsBuy
Oct 2019MaintainsBuy
Oct 2019MaintainsOutperform

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