Investors who bought stocks during the COVID-19 market crash in 2020 have generally experienced some big gains in the past two years. But there is no question some big-name stocks performed better than others since the pandemic bottom.
GameStop's Big Run: One company that has been a tremendous investment in the past two years 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. From the start of 2016 to the start of 2020, the company’s trailing 12-month revenue dropped 21.6%.
The global COVID-19 outbreak temporarily shut down all of GameStop’s stores in 2020.
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.
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GameStop In 2021, 2022, 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. Since the dust has settled on the initial short squeeze, GameStop shares are now back down to the $136 level.
Still, investors who bought GameStop on the day it hit its 2020 pandemic low and held on have generated a huge overall return on their investment. In fact, $1,000 in GameStop stock bought on April 3, 2020, would be worth about $49,400 today.
Looking ahead, analysts are expecting GameStop's stock to continue to drift lower in the next 12 months. The average price target among the three analysts covering the stock is $87.70, suggesting a 35.8% downside from current levels.
Photo: Mike Mozart via Flickr Creative Commons
