Business Corpus: Video Game Stocks Rise, Shake Off 'Fortnite' ThreatVideo game stocks rose on Friday after an upbeat report from Activision Blizzard eased concerns that "Fortnite Battle Royale" from privately held Epic Games would hurt the major publishers. The post Video Game Stocks Rise, Shake Off 'Fortnite' Threat appeared first on Investor's Business Daily.

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Video game stocks rose on Friday after an upbeat report from Activision Blizzard (ATVI) eased concerns that "Fortnite Battle Royale" from privately held Epic Games would hurt the major publishers.

On a conference call with analysts late Thursday, Activision executives said the popularity of free-to-play "Fortnite" is likely to attract new game players into the market. That could spark innovation in the industry, they say.

In recent weeks, Wall Street analysts have fretted that "Fornite" could draw away gamer time and spending. That could negatively impact video game stocks Activision, Electronic Arts (EA) and Take-Two Interactive Software (TTWO).

Fortnite "is attracting new players of all ages and gender and it is helping gaming become even more mainstream entertainment," Activision Chief Executive Bobby Kotick told analysts. "Gaming is constantly evolving and innovating, which often expands the marketplace, and the success of 'Fortnite' is no exception."

Chief Financial Officer Spencer Neumann said Activision has seen "some near-term impact" from "Fortnite." Still, the company continues to post record results from its deep bench of game franchises, which include "Call of Duty," "Overwatch," "World of Warcraft" and "Candy Crush."

Activision Beats Views

The Santa Monica, Calif.-based firm earned an adjusted 38 cents a share, up 23% year over year. That's on adjusted sales of $1.38 billion, up 16% in the March quarter. Analysts expected 35 cents and $1.32 billion.

Activision shares jumped 4.5% to close at 69.84 on the stock market today. Among other video game stocks, EA climbed 2.9% to 123.64 and Take-Two increased 3.5% to 108.76.

Activision was the first of the major U.S. video game publishers to report March-quarter results. Electronic Arts is scheduled to report its fiscal fourth-quarter results on Tuesday. Take-Two is due to post its fiscal fourth-quarter results on May 16.

Fortnite Concerns Overblown

Activision's performance in the first quarter was impressive, considering that it had no major new product releases, Credit Suisse analyst Stephen Ju said in a note to clients. Plus, it faced competition from upstart "battle royale" games including "Fortnite" and "PlayerUnknown's Battlegrounds."

Battle royale games are multiplayer online games where the virtual combatants fight to the death to be the last one standing.

Analysts expect major publishers like Activision to add battle royale modes to upcoming games.

Ju reiterated his outperform rating on Activision and raised his price target to 85 from 84.

Baird analyst Colin Sebastian said "Fortnite" concerns appear "overblown." He expects the next "Call of Duty" release, due out Oct. 12, to have a battle royale mode.

"We note Activision's historical success as a 'fast follower' (e.g., music games, mobile) providing a degree of confidence that the company will find success in the new mode, where affinity for established franchises can be leveraged to drive higher engagement levels with new gameplay," Sebastian said in a report. He maintained his outperform rating on Activision with a price target of 80.

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