The world's largest home entertainment software maker, Activision Blizzard (NASDAQ: ATVI), has seen its fair share of bullishness lately. Indeed, it finds its shares up nearly 40% since the beginning of 2013 after posting better-than-expected fourth-quarter and full-year results in early February. Going beyond that, the company has another exciting year in store for it.

How will Activision keep up the positive momentum for its shareholders? To answer the question, the Fool compiled a research report to break down the each critical facet of the Activision investment thesis. We've included an excerpt from one section below for our readers. Enjoy!

Risks
Games peak in popularity, and franchises fade.

Investors have seen this when Activision Blizzard unplugged its once smoking hot Guitar Hero franchise. It's safe to say that World of Warcraft also peaked at 12 million players in 2010. Despite the rollout of generally well-received expansion packs, gamers have been stepping back in nearly every passing quarter. Tactics to combat the net defections -- including making its first 20 levels "free to play" to hook new games and giving away copies of Diablo III (a $60 game) to get players to extend their subscriptions -- have only softened the slide. Through September 2012, Activision Blizzard continues to entertain more than 10 million World of Warcraft players, though it wouldn't be a shock to see that slip into the seven figures in 2013.

Investors need to take this in stride, because one day it will be Call of Duty, Skylanders, Starcraft, and Diablo on the way out.

Activision Blizzard has proven that it can drum up new franchises to replace the negative trending properties, but clearly this is a risk in any gaming company. Players are fickle.

It also doesn't help that the gaming industry itself has been moving away from the traditional console, handheld, and PC games that Activision Blizzard excels in. Smartphones and tablets are booming at a time when PC sales have stalled and console sales are falling. If the trend continues, Activision Blizzard will need a bigger presence on the portable gadgetry that is garnering the attention of casual users that used to play it games.

Longtime Fool contributor Rick Aristotle Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Activision Blizzard. The Motley Fool has a disclosure policy.

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