Investors who have owned stocks since 2016 have generally experienced huge 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 major stocks are performing better down the road than others.
GameStop rises: One stock that has apparently risen from the dead and become one of the best investments in the last five years is the video game retailer GameStop Corp. (NYSE: GME).
Like other retailers, GameStop was providing life support even before the 2020 pandemic. From the beginning of 2016 to 2020, the company’s overdue twelve-month revenue fell by 21.6%. In 2018, GameStop reported a 3% drop in revenue and a net loss of $ 673 million. In the most recent quarter, GameStop’s revenue fell 30.1% to 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 continued to decline as more video game sales online shifted.
The sale picked up steam in 2019, and GameStop finally reached $ 3.15 in the early fall of 2019.
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GameStop in 2021, beyond: GameStop returned to as high as $ 6.92 at the end of 2019 before selling the COVID-19 pandemic, which pushed the stock back to $ 2.57 in March. Fortunately for GameStop investors, the stock gained a major catalyst in August 2020 Chewy Inc. (NYSE: CHWY) founder Ryan Cohen has taken a 9% stake in GameStop.
By the end of 2020, GameStop shares were again above $ 10, which caught the attention of the Reddit WallStreetBets trading community. WallStreetBets acknowledges the opportunity created by GameStop’s huge short-term interest, and they use an option market gamma pressure to bring a short-term pressure from an institutional investor to send GameStop shares ‘to the moon’, or at at least up to $ 483.
GameStop investors who bought and held their lottery ticket through a historically volatile period of five years made a significant profit. In fact, $ 1,000 of GameStop shares purchased in 2016 would be worth about $ 16,100 today, assuming reinvested dividends.
Looking ahead, analysts expect GameStop’s journey to the moon to be a back-and-forth expedition. The average price target of the nine analysts covering the stock is $ 12.50, indicating a downside of 94.9% from current levels.
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