Electronic Arts slips after Apex Legends season-2 fails to enthuse gamers

Shares of Electronic Arts (Nasdaq: EA) dropped about 5% Friday as the market sentiment was hit by reports that Apex Legends season-2, the gaming giant’s latest launch, continues to get a lukewarm response. Expectations were very high ever since the company announced the revised version of Apex Legends, one of the most popular games, with additional features.

Prior to the launch, the upgrade version was touted as a strong competitor to Fortnite, an all-time hit from Epic Games that set a new paradigm for video gaming with its mass appeal.  Along with the hype surrounding Apex Legends season-2, there has been a great deal of skepticism in the market. The general perception is that if not upgraded to the cross-platform mode, the game will fail to meet players’ expectations.

The general perception is that if not upgraded to cross-platform, the game will fail to meet players’ expectations

The initial response to the closely-followed launch earlier this week showed that the second season of the free-to-play game failed to meet expectations in terms of viewership.

Related: Activision Blizzard Q1 2019 Earnings Call Transcript

After publishing the not-so-impressive quarterly results in May, the management had hinted at new launches offering alternative ‘engagement models’ for players, including free-to-play games. The company also provided above-consensus financial guidance for the first quarter and fiscal 2020.

The fourth-quarter earnings fell sharply to $0.69 per share and missed the estimates, hurt by a 22% decline in revenues to $1.24 billion, underscoring the general weakness in the business.

Electronic Arts stock is prone to sharp fluctuations and the latest loss is the biggest since February this year. While the stock is down 36% since last year, it is above the levels seen at the beginning of the year. The ripple effect of Friday’s selloff was visible in the performance of the other gaming stocks also. Activision Blizzard (ATVI) and Take-Two Interactive (TTWO) dropped more than 1% mid-day.

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