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Investors who have owned stocks since 2016 generally have experienced some big gains. In fact, the SPDR S&P 500 (NYSE: SPY) total return in the past five years is 110.5%. But there is no question some big-name stocks performed better than others along the way.
GameStop Rises: One stock that seemingly rose from the dead to become one of the best investments around over the past five years is video game retailer GameStop Corp. (NYSE: GME).
Like other brick-and-mortar retailers, GameStop’s business was on life support even prior to the 2020 pandemic. From the start of 2016 to the that of 2020, the company’s trailing 12-month revenue dropped 21.6%. In 2018, GameStop reported a 3% drop in revenue and a $673 million net loss. In the most recent quarter, GameStop’s revenue plunged 30.1% on a net loss of $18.8 million.
At the beginning of 2016, GameStop shares were trading at around $27. Over the next three years, the stock drifted steadily lower as more video game sales shifted online.
The sell-off picked up steam in 2019, and GameStop ultimately bottomed out at $3.15 in early fall of 2019.
GameStop In 2021, Beyond: GameStop rebounded to as high as $6.92 in late 2019 before the COVID-19 pandemic sell-off, which pushed the stock back down to as low as $2.57 in March. Fortunately for GameStop investors, the stock got a major catalyst in August 2020 when Chewy Inc (NYSE: CHWY) founder Ryan Cohen took a 9% stake in GameStop.
By late 2020, GameStop shares were back above $10, drawing the attention of the Reddit WallStreetBets trading community. WallStreetBets recognized the opportunity GameStop’s large short interest created, and they utilized an option market gamma squeeze to trigger an institutional investor short squeeze to send GameStop shares “to the moon,” or at least as high as $483.
GameStop investors that bought and held on to their lottery ticket through a historically volatile five-year period turned a significant profit. In fact, $1,000 worth of GameStop stock bought in 2016 would be worth about $16,100 today, assuming reinvested dividends.
Looking ahead, analysts expect GameStop’s journey to the moon will be a round-trip expedition. The average price target among the nine analysts covering the stock is $12.50, suggesting 94.9% downside from current levels.
(Photo via BentleyMall on Wikipedia.)
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