It has been a volatile year for Activision Blizzard (ATVI) shareholders, with the stock having logged market-thumping gains through the summer before falling to a 19% decline as we approach the end of 2018. 

Of course, the video game developer's business value hasn't changed by nearly that much. Instead, the swings have been driven by investors' shifting opinions on its operating outlook.

Let's take a closer look at those trends as Activision enters its busiest selling period of the year.

Two young adults playing video games.

Image source: Getty Images.

Starting with high expectations

The company entered the year with impressive momentum as surging sales and profits pushed shares higher by a head-turning 70% in 2017. Things appeared to be going in the same direction through its next few earnings releases, too. Activision said in early February, for example, that a growing user base combined with surging digital spending to push operating margin above management's forecast. 

The user base ticked lower over the next six months, but the decline didn't worry management since Activision's biggest content releases in the Call of Duty, World of Warcraft, and Destiny franchises were yet to come. At the same time, CEO Bobby Kotick and his team were careful to stress to investors that the stacked launch schedule meant that an unusually large portion of its annual earnings would be produced during the third and fourth quarters.

Letdowns and rebounds

That seasonality bit investors in early November, when the company revealed that its player base declined in the third quarter despite a few major product launches. "Not all of our franchises are experiencing the momentum we see in Call of Duty, World of Warcraft, and Candy Crush," Chief Operating Officer Coddy Johnson told investors. The latest chapter in the Destiny franchise was a particular disappointment, executives said, but the new Call of Duty title appears to be selling well.

Activision has plans to recover its momentum in the Destiny shooter through live events and stepped-up content releases. Like previous games in the franchise, Black Ops 4 is likely to again be one of the top-selling titles of the year, although Take-Two Interactive's Red Dead Redemption 2 will give it a run for its money.

Still, there are plenty of other reasons to be bullish about Activision's broader business, including the fact that user engagement recently hit a record of 52 minutes per day. Among the major growth levers that the developer can pull over the next few years are an emerging advertising business, esports broadcasting, and consumer products and licensing. 

The short-term risks have risen lately, due to the shaky demand momentum in parts of the portfolio heading into the critical holiday selling period, and that volatility is being reflected in a stock that's now given back a part of last year's soaring gains. "We still have a lot of execution ahead of us," management told investors in August.

That's just as true today, since the way the company performs over the next few weeks will determine whether it hits its targets of $7.4 billion of sales and non-GAAP earnings of $2.46 per share. Those numbers would reflect a healthy entertainment business with a promising future. But investors might have gotten a bit ahead of themselves in assuming Activision's growth would occur evenly across its portfolio. Instead, as its attacks on new gaming niches have become bolder and more diverse, the company is bound to stumble with a few launches along the way.