The Next “Fortnite”
I looked above me and saw distinct tracers coming at me from the machine gun nest across the river.
Oh no! My son and I had been spotted!
Next thing I knew, the quiet night was split by the whirring sound of bullets overhead and the “THWAP!” of those same bullets hitting the tree trunks behind us.
“Duck David! They’ve got us pinned down!”
I could feel my heart pounding.
I could also feel the concussion of a mortar round that landed 50 yards behind us.
We were in a fight for our lives!
Immersive Video Games Attract Young and Old Alike
As you may have guessed, the “battle” that David and I were fighting was part of the video game Call of Duty.
And yes, I know that the experience of playing a game could never to hold a candle to the experience of actual warfare.
If you’re a veteran, please know that I have the utmost respect for your service. And I don’t actually believe that anything happening in a game compares to the experiences you’ve been through.
But it is certainly true that video games have become much more realistic and engaging.
There are so many different genres available to gamers. I’m talking about everything from battle simulators like Call of Duty, to sports games like Madden NFL and FIFA 18, to racing games like Need for Speed and Mario Kart.
My little kids really enjoy playing Minecraft, which is a creative game where they can build houses and farms and even underground hideouts.
There’s literally a video game for every age group and just about any interest. And today, the population of video game players is increasing thanks to the engaging nature of many new games.
If you’re an investor, you should be paying close attention to the gaming market right now.
Because not only is the technology getting better (which is attracting more users around the world), there’s also a major shift occurring when it comes to which games are being played the most!
In particular, there’s one popular game that has captured the attention of a large portion of gamers for many months now.
But as the life cycle for that game turns and video game players start looking for new challenges, a handful of video game stocks are set to trade higher.
Let’s take a look at the changing landscape for the video game market, and how you can profit from it!
A Battle for Dominance Opens Up New Market Opportunities
In the summer of 2017, the gaming community was extremely excited about a new popular game called Fortnite.
This game allowed 100 players at a time to drop onto an island, scavenge for weapons and other supplies, and engage in a battle to see who could be the last one standing. The game became so popular, that in February of this year there were as any as 10.8 million people playing at once, with over 250 million people registered.1
It’s hard to even wrap my head around that many people playing one game!
The business model behind Fortnite is particularly interesting.
You see, the game is free to play. But Fortnite users can pay up for special items like costumes, special “skins” or coverings for weapons, and other unique items. While these items don’t actually change the way the game is played, it’s estimated that Fortnite generated $3 billion in profit last year for its parent company Epic Games.2
To say that Fortnite has been a tremendous success would be an understatement.
Unfortunately, most investors have been left watching from the sidelines because Epic Games is a privately held company, not trading on the stock market. Even worse, the popularity of Fortnite has made it difficult for gaming companies that DO trade on the market, because Fortnite has been so popular that gamers haven’t been as interested in other games.
But all of that is changing now.
Because while gamers are very loyal to the games they love most, they’re also a very fickle group. And once a game falls out of favor, another will take its place. Sometimes several games can be wildly popular at the same time.
And that’s exactly what I’m seeing in the video game market right now.
Fortnite’s popularity appears to have peaked sometime in mid to late 2018.
Twitch, the popular site where gamers watch and share videos of their particular games, noted that hours watched for Fortnite declined by 15% between the second and fourth quarter of last year. And the average number of searches for Fortnite is down by more than a third.3
To be sure, Fortnite has had an epic run (no pun intended).
But today, as the game’s popularity declines, the opportunity for a new game to take its place is an exciting prospect for investors!
Who Could Take Fortnite’s Place and Capture Billions in Profits?
There are a number of different gaming companies that could benefit from a shift in video game popularity. And it’s important to remember that there actually could be several winners as the video game market is big enough to support several blockbuster hits at once.
I’ve got my eye on a number of different companies and I recommend putting a couple of these to work in your own portfolio.
Electronic Arts (EA) is known for its sports franchises. These include the Madden Football, NHL Hockey, NBA Live Basketball, and many more. EA also launched a new game titled Apex Legends which is geared to compete directly with Fortnite. The stock is off sharply from its 2018 peak (thanks in part to Fortnite’s success). But since the beginning of the year, the stock has been rebounding. EA is set to report earnings on May 7th after the close.
Take Two Interactive (TTWO) built its reputation on its popular Grand Theft Auto franchise, and more recently launched a popular fantasy game titled Red Dead Redemption. The company has a knack for more edgy controversial games, but has been able to turn a profit from these titles. Similar to EA, shares of TTWO have pulled back from their 2018 peak. But as gamers look for the next thing after Fortnite, TTWO stands to re-capture market share.
Activision Blizzard Inc. (ATVI) has seen success both from traditional console video games (played on a TV through a console like Microsoft’s Xbox or Sony’s PlayStation) as well as from mobile games played on smartphones. The company’s Overwatch game has been popular on the console side, and I’m sure you’re familiar with the Candy Crush games that have been popular on tablets and smartphones. ATVI is expected to grow profits by 67% this year, and a blockbuster hit could drive these expectations higher.
Zynga Inc. (ZNGA) has been a dominant company when it comes to casual games people play on their smartphone. Games from ZNGA have been hosted on networking sites such as Facebook, giving the company a wider reach of potential customers. This year, the company’s new Zynga Poker game has the potential to be a big hit, driving user engagement and profits higher.
When I was a young adult, I remember Halo being the game of choice that captured everyone’s attention.
Since then, there have been several other blockbuster hits in the gaming business, with Fortnite simply being the latest.
In the fast-changing world of video games, there are many chances for new winners to emerge. I’m expecting to see a new hit (or several hits) coming from this group of companies this year, and I hope you’ll put yourself in position to profit from the shift!
Here’s to growing and protecting your wealth!
1 Fortnite’s player count is closing in on 250 million, PC Games
2 How Does Fortnite Make Money? All the Ways the Free Video Game Cashes in on Its 200 Million Players, Money
3 IS FORTNITE IN DECLINE? NEW DATA FROM STREAM ELEMENTS, Epic Games