Electronic Arts: Apex Legends Disappointment Signals Substantial Pain Ahead

Apr. 22, 2019 11:25 AM ETElectronic Arts Inc. (EA)13 Comments5 Likes
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  • Twitch and Google data show interest in Apex Legends is fading quickly.
  • Popular streamers and influencers are quitting Apex.
  • Apex is wildly overvalued for a fading game.
  • With Apex making up a substantial portion of EA's valuation, EA's stock faces substantial declines.

A lot has happened to Electronic Arts (NASDAQ:EA) since our last article in February. Despite what we believe to be deteriorating fundamentals, EA's stock has actually remained pretty stable. EA's stock has only recently started to gap down. However, we don't see this as a buying opportunity, and still think investors should continue to avoid the stock.

Faltering Apex Legends

We said it before and will say it again: Apex is overvalued. It is successful for a Battle Royale game, but it won't reach Fortnite levels. Not even close.

Although Apex did have a strong launch, this traffic was mainly acquired and not organic. EA spent millions to pay streamers to stream Apex gameplay on launch day and a few days afterwards. When the streamers quit or stopped streaming Apex, interest in Apex dropped sharply.

Google Trends


As you can see, both viewership on Twitch and searches on Google declined substantially. If you're wondering if Fortnite suffered the same fate after its launch:


As you can see, Fortnite has held pretty steady since Apex launched. Looking at other websites, we can see more detailed statistics for Fortnite since it launched.


This site shows that Fortnite has had fairly steady viewership since it launched. Apparently, only Apex suffered a sharp traffic drop. This trend holds true when filtering for YouTube searches.

Google Trends

So if Apex only has about 10% of the Google searches that Fortnite has, ~20% of its Twitch viewers, and ~4% of Fortnite's YouTube searches, what does this all mean?

There can only be one conclusion - The player base of Apex Legends is either declining or stagnant. Apex isn't the "rocket growth" game that analysts once praised. If we had to put a number to Apex's player base, we estimate it at between 10-20 million, far from the 50 million that played it in its glory days.

Remaining players are not happy

Michael "Shroud" Grzesiek is one of the top Twitch streamers and probably the most influential Apex Legends player. Unfortunately for Apex Legends, he is thinking of quitting and moving to competitor PUBG. He explained his rationale by the lack of content from EA and slow servers. He is quoted as saying:

"I've got about three games left before I quit this game forever."

Indeed, if you look on his YouTube channel, he has recently stopped posting Apex Legends videos as frequently.

He's not the only one with this sentiment, however. Ninja, another popular streamer, says he personally prefers Fortnite. Dr. Disrespect, another popular Twitch personality, is much more critical, saying that Apex Legends is going the way of H1Z1, a dead battle royale game.

Honestly, we believe the criticisms of these influencers should be taken very seriously. They not only have the power to generate interest and maintain interest for a game, but they also are veteran gamers, and have seen many games both live and die. They know the market far, far better than most investors.

We did some fact checking into lag claims and it turned out to be true. A YouTuber and coder discovered some problems with Apex Legends coding. As for the lack of content updates, it may be an even worse problem. Despite massive hype for the Season 1 battle pass, it well... was terrible. This popular thread on Reddit describes the problem. While people expected great content from the pass, they got cheap filler. Compare that with Fortnite, which updates its game nearly weekly. This article by Polygon describes the difference:


Not only that, but Fortnite itself is copying Apex's best practices. Fortnite has copied Apex's popular pinging system and its respawn system. We've seen this story before, and it didn't end well for the new entrant.

Image result for instagram vs snapchat

Google Images

Valuing Apex

Because most comparable companies are privately held, it is quite hard to place a valuation on Apex. However, we will do the best we can with publicly available data.

Epic recently raised money at a $15 billion valuation. However, CNBC recently wrote a piece that mentioned Unreal Engine, Epic's launcher, may be the key to Epic's valuation. With Fortnite's success, Unreal Engine just got a major credibility boost, and may now be the best game development platform in the world, if not the best enterprise software application in the world.

Although competitor Unity Technologies is IPOing at $3 billion, we believe Unreal is worth much more as many have stated that it is the much better software for developing AAA games, the money makers in the game industry. And unlike Unity, Unreal charges a royalty instead of a fixed price, which means when developers make money, Unreal makes money too.

Using a very conservative $3 billion for Unreal Engine's valuation, that would mean Fortnite would only be worth $12 billion. And if Apex Legends is worth an aggressive 15-20% of Fortnite, that would mean Apex would only be worth $1.8-$2.4 billion, or way lower than the $7.4 billion+ valuation ascribed to it by the market a few days after it launched. Even now, the market still thinks Apex is worth ~$4.5 billion.


The market's ignorance of Twitch and Google data provides an excellent opportunity for savvy investors to exit their EA position before it's too late. It is now much more clear that Apex is:

  1. Not a serious Fortnite contender
  2. Worth far less than its implied value

EA has certainly earned a substantial ROI on its advertising for Apex, but in the end, a lack of updates and a multitude of bugs will cause the downfall of this game.

This article was written by

WY Capital profile picture
Looking out for underrated companies that could shape the future of humanity, or just provide strong returns over the long run. Note that my opinions could change after conducting more research or based on anything, honestly. DYODD

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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