The surging popularity of Epic Games' "Fortnite" battle royale game may have peaked due to competition from one of gaming's biggest franchises, according to Benchmark.

The firm told it clients the initial response to Activision Blizzard's "Blackout" game mode in "Call of Duty: Black Ops 4" was extremely positive.

Activision's "upcoming Call of Duty: Black Ops IIII: Blackout, Battle Royale (BR) mode, PS4 beta launched yesterday, greatly exceeding our expectations. Buzz from streamers was sensational, in our view," analyst Mike Hickey said in a note Tuesday. "Popular Twitch streamers were gushing on the quality and fun of the play, while subscriber comments were calling Blackout a Fortnite and/or PUBG killer."

Activision Blizzard shares closed 7 percent higher Tuesday.

Hickey reiterated his buy rating for the game publisher's shares, predicting its the "Call of Duty" battle-royale offering will thrive against "Fortnite."

The analyst said the "Call of Duty" beta generated nearly 400,000 viewers on Twitch, nearly tripling "Fortnite's" number. He estimates the game's battle royale mode can generate more than $500 million of annual incremental sales.

"We believe Blackout will be a potentially massive hit," he said. "We believe the game will migrate investor focus from the Fortnite led BR competitive threat to the opportunity for BR in driving meaningful growth."

Hickey reaffirmed his $93 price target for Activision Blizzard shares, representing 25 percent upside to Monday's close.

"Call of Duty: Black Ops 4" is slated for release on Oct. 12.

Activision Blizzard shares are up 17 percent this year through Monday versus the S&P 500's 8 percent gain.