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Investors who have owned stocks since 2016 have generally seen big gains. In fact, the SPDR S&P 500 (NYSE: SPY) Total return over the past five years is 110.5%. But there is no doubt that some reputable stocks have performed better than others along the way.
GameStop goes up: One stock that has seemingly resurrected to become one of the top investments over the past five years is the video game retailer. GameStop Corp. (NYSE: GME).
Like other physical retailers, GameStop’s business was on life support even before the 2020 pandemic. Between early 2016 and early 2020, the company’s 12-month revenue fell by 21 , 6%. In 2018, GameStop saw a 3% drop in revenue and a net loss of $ 673 million. In the last quarter, GameStop’s revenue plunged 30.1% from a net loss of $ 18.8 million.
In early 2016, GameStop shares were trading at around $ 27. Over the next three years, the stock declined steadily as video game sales moved online.
The sale picked up in 2019, and GameStop finally hit a low of $ 3.15 in early fall 2019.
Related Link: WallStreetBets Posters Warn Retail Traders About Squeezing Money: ‘The Antithesis To Who We Are’
GameStop in 2021, beyond: GameStop rebounded to $ 6.92 at the end of 2019 before the liquidation of the COVID-19 pandemic, which brought the stock down to $ 2.57 in March. Fortunately for GameStop investors, the action got a major catalyst in August 2020 when Chewy Inc (NYSE: CHWY) founder Ryan Cohen took a 9% stake in GameStop.
By the end of 2020, GameStop shares were back above $ 10, gaining the attention of the Reddit trading community WallStreetBets. WallStreetBets recognized the opportunity created by GameStop’s big short interest and used gamma pressure in the options market to trigger a short squeeze on the institutional investor to send GameStop shares “to the moon”, or at least until ‘at $ 483.
GameStop investors who bought and held their lottery ticket over a historically volatile five-year period made a significant profit. In fact, $ 1,000 of GameStop shares purchased in 2016 is worth around $ 16,100 today, assuming the reinvestment of dividends.
Going forward, analysts expect GameStop’s trip to the moon to be a round-trip expedition. The average price target among the nine analysts covering the stock is $ 12.50, which suggests a drop of 94.9% from current levels.
(Photo via BentleyMall on Wikipedia.)
© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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