Today we will focus on a stock I have been mentioning on Twitter that could feel the weight of the Fortnite hysteria. Fortnite has taken over not only the video gaming world, but also video gaming content. Now that may sound silly, but there is a reason why twitch was a highly sought after target by Amazon. Couple that with the video views on YouTube and you can see why this is a big deal. It seems that $ATVI finally has true competition in Fortnite. What is devastating to $ATVI and their flagship Call of Duty franchise is that Fortnite is a free to play game. That is right…. FREE TO PLAY. That being said, both video game makers are dependent on what is called “Micro-transactions” within the games. That is when players can purchase items with in game currency. Since a majority of revenue and margin for $ATVI is dependent on these micro-transactions, it has to be alarming that Fortnite revenue growth is exploding month over month and at the same time, decreasing steadily for Call of Duty. In fact, Fortnite’s growth has been so explosive, we are seeing a decrease in all of the major names. PUBG or Player Unknown Battleground(The biggest battle royale game prior to Fortnite) has seen their active user base drop as much as 40%. Destiny and Overwatch (both $ATVI games) also have seen a sharp decrease in users. However, this pales in comparison to Call of Duty. While they still have a great deal of active players, they have seen a huge drop also. That is not normal and this is where Fortnite has played the biggest role. They stand as the biggest threat that $ATVI has ever seen. Consider a free game is now generating revenue from micro-transactions at a greater pace than Call of duty, it could literally crush $ATVI. Fortnite / Epic Games is on pace to generate 3.5 billion in gross revenue this year. I feel people are more inclined to spend for a free game, than for one they already paid $60 bucks for. I maybe completely wrong on this, but the YouTube metrics do not lie. Revenue does not lie. Active user metric do not lie. People won’t spend on games they do not actively play. With exports exploding thanks to Twitch and YouTube, this may just be the start for Fortnite. That means this maybe the peak for $ATVI. Wall street has started to take notice. It is time you should also. IF $ATVI gets below the 200 day SMA (teal blue line) and closes below that level, I suspect the stock will make a new 52-week low within the next two quarters if not sooner.
I am posting a screenshot of a stock that I felt was a way of buying into the Fortnite hype. The ticker symbol is $HEAR. I had posted the tweet in May 2018. $HEAR was around $9.00 a share at the time. Today $HEAR is trading above $31.00.