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Buy EA shares because its battle-royale mode in 'Battlefield' will fend off 'Fortnite,' analyst says

  • Piper Jaffray reiterates its overweight rating for Electronic Arts shares, predicting "Battlefield V's" new battle-royale mode will boost its game sales.
  • The analyst forecasts the game will sell 16 million units during fiscal 2019.

Electronic Arts will benefit from the battle-royale trend popularized by Epic Games' "Fortnite," according to one Wall Street firm.

The game publisher announced Saturday it will add a battle-royale mode to its "Battlefield V" game. The title is slated for release on Oct. 19.

Piper Jaffray reiterated its overweight rating for Electronic Arts shares, predicting the new battle-royale mode will boost its game sales.

"EA confirmed that Battlefield V (shipping Oct CY18) will have a 'Fortnite-like' Battle Royale mode included in the game. This could help Battlefield regain any market share lost to Fortnite & PUBG, although we believe any share loss for Battlefield has been minimal," analyst Michael Olson said in a note to clients Monday. "Perhaps more importantly, it will provide another way for EA to drive higher engagement with the Battlefield player base."

Epic Games introduced a battle-royale mode for "Fortnite" on computers and gaming consoles in September. This mode allows up to 100 online players to battle each other to the death until only one player survives. The company revealed in January that the game has been played by more than 45 million people worldwide.

The surging popularity of "Fornite's" battle-royale mode is attracting competition. Last month, Activision Blizzard also said it will include a battle-royale game mode called "Blackout" in "Call of Duty: Black Ops 4."

Olson reaffirmed his $148 price target for EA shares, representing 7 percent upside to Friday's close.

The analyst estimates the company will sell 16 million units of "Battlefield V" in fiscal 2019, an incremental $150 million in sales versus the previous year's "Star Wars Battlefront II." He also forecasts 4.5 million unit sales for EA's "Anthem" game this fiscal year.

"EA is our focus name in video games for the next six months as the company enters a period with many potential catalysts, and trades at a discounted valuation to closest comp ATVI, [Activision]" he said. "In addition to a favorable FY19 pipeline, we expect that an increased focus on opportunities in subscription will drive a favorable narrative that could result in multiple expansion."

EA shares are up 31 percent this year through Friday versus the S&P 500's 4 percent gain.