Take that, Fortnite.
Video game maker Electronic Arts reported strong quarterly results and issued a healthy outlook Tuesday thanks in part to Apex Legends — a popular, free-to-play multiplayer game that is similar to Fortnite.
Shares of Electronic Arts (EA) rose as much as 2% Wednesday on the news. The stock is now up about 20% this year.
Apex Legends, which was released in February, is the “fastest-growing new game we’ve ever had,” EA chief executive Andrew Wilson told analysts on a conference call Tuesday evening. He said the game reached a “milestone 50 million players,” and added that “millions more have continued to join.”
Nearly 30% of the game’s players are new to EA, Wilson added.
Apex Legends, Fortnite and similar battle royale games have taken the industry by storm. These games primarily generate revenue by selling virtual currencies that players can use to add features to their characters.
Apex Legends generated about $150 million in revenue during EA’s most recent quarter, according to Wedbush Securities analyst Michael Pachter. That’s more than 10% of the company’s total sales.
He added that he thinks the game will account for $450 million in sales this fiscal quarter.
The success of Apex Legends and EA’s stable of sports games such as Madden, NBA Live and FIFA is why Baird analyst Colin Sebastian raised his earnings estimates for EA. He’s also bullish on a new Star Wars game that will come out later this year.
“EA has an enviable lineup of game franchises,” Sebastian said in a report.
Piper Jaffray analyst Michael Olson agreed. He said in a note to clients that new games in EA’s popular Need for Speed and Plants vs. Zombies franchises are coming this fall and will also help give sales and earnings a boost.
Another positive for the company: EA announced Tuesday that it is expanding its subscription service for gamers beyond Microsoft’s (MSFT) Xbox and PCs to Sony’s (SNE) PS4 console.
That opens up another lucrative revenue stream for EA beyond the sale of physical games, downloads and in-game purchases.
Can EA become the Netflix of gaming subscriptions?
“EA is building a Netflix for video games,” Needham analyst Laura Martin wrote in a report. She estimates that EA will generate about $240 million in subscription revenue this year.
EA also has big international opportunities that may not yet be factored into the company’s outlook, either. Benchmark analyst Mike Hickey noted that “EA is in advanced discussions to bring [Apex Legends] to China,” for example.
Add all that up and it’s clear why EA is doing so well.
Wilson isn’t too worried about the competition, either. He said on the earnings call that he welcomes rivals like Fortnite developer Epic Games, which is worth about $15 billion. (EA has a market cap of about $28 billion.) Other major players include Activision Blizzard (ATVI), which owns Call of Duty, and Take-Two Interactive (TTWO), the maker of the popular Red Dead Redemption franchise.
The gaming market is big enough for multiple hits. Millions of people tune in to watch people playing all kinds of video games on Amazon (AMZN)-owned Twitch and Google’s (GOOGL) YouTube. Apple (AAPL) and Snapchat (SNAP) are betting more on games as well.
“Other people are also going to make great games, and whether that’s Fortnite or its Red Dead Redemption 2, that’s no different for us than it’s been certainly for the 20 years I’ve been at this company,” Wilson said. “The good news, of course, is there’s more and more players across more and more platforms across more and more business models, each and every day and more now than there have ever been. And so we see the opportunity as being bigger and more exciting than it’s ever been.”