Investors who have owned stocks in the past year have generally experienced some big gains. But there is no question some big-name stocks performed better than others along the way.
GameStop’s Big Run: One company that has been a decent investment in the past year has been video game retailer GameStop Corp. (NYSE:GME).
Unfortunately for long-term GameStop investors, the stock and the company were struggling even prior to the COVID-19 pandemic as the video game business has undergone a dramatic shift from physical discs to online downloads.
However, GameStop experienced a near worst-case scenario in March 2020 when the global COVID-19 outbreak temporarily shut down all of GameStop’s stores. In August, GameStop announced it would be permanently closing between 400 and 450 stores in an effort to shrink its way to success.
From the start of 2016 to the start of 2020, the company’s trailing 12-month revenue dropped 21.6%.
Related Link: Ryan Cohen, GameStop Traders Celebrate Anniversary Of January 2021 Meme Stock Frenzy
At the beginning of 2020, GameStop shares were trading around $6.15. By the beginning of March, the stock had dropped below $3.40 after news of the virus spreading in China prompted concerns about a U.S. pandemic. On April 3, GameStop shares dropped all the way down to $2.57 in intraday trading, the stock’s low point of the pandemic. Fortunately, GameStop's share price bounced off of that level as the broad market recovered from the sell-off.
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 December, the stock was trading above $20 in hopes that Cohen could spearhead an overhaul of GameStop’s struggling business model.
GameStop In 2021, Beyond: Fortunately for GameStop investors, the stock got caught in the middle of a massive coordinated buying campaign in January 2021. Reddit’s WallStreetBets community made GameStop its primary stock to buy as part of its targeted short squeeze effort.
The short squeeze sent the stock skyrocketing from under $25 per share to as high as $483 in a matter of days. Unfortunately, GameStop has yet to follow up its meme stock trading crazy with meaningful progress on its turnaround efforts.
See Also: A Short Seller Joins Benzinga's 'Power Hour' To Talk GameStop. The Rest Is History.
In the most recent quarter, GameStop reported a $105-million net loss and revenue that was down 9.8% from 2019 levels and nearly 38.4% from peak levels back in 2013. Since the dust has settled on the initial short squeeze, GameStop's short interest plummeted and shares are now back down below the $99 level.
Thanks to WallStreetBets, GameStop investors who bought one year ago and held on have still generated nice returns on their investments. In fact, $1,000 in GameStop stock bought on Jan. 25, 2021, would be worth about $1,541 today.
Looking ahead, analysts are expecting GameStop’s fundamentals to bring the stock back down to earth in the next 12 months. The average price target among the three analysts covering the stock is $45, suggesting a 54.6% downside from current levels.
Photo: Mike Mozart via Flickr
