UK share markets continue to build on their recent strength today. The FTSE 100’s dealing at one-month highs while the FTSE 250 has just hit fresh one-year highs. However, their ascents are quite tepid compared to the rise of Cineworld Group’s (LSE: CINE) share price today.
Cineworld’s jumped 4% after comments from Prime Minister Boris Johnson on Monday on the reopening of the leisure sector. He suggested that a programme of rapid Covid-19 testing could prompt the reopening of attractions “such as nightclubs or theatres, those parts of the economy we couldn’t get open last year.”
These comments follow US President Joe Biden’s recently-announced plans to ramp up coronavirus testing in the States. This has boosted similar hopes that Cineworld’s Regal chain of cinemas could reopen before too long. Cineworld generates 73% of revenues from its US sites.
A high-risk UK share
Hopes that UK leisure shares like Cineworld could fling their doors open to the public soon are high. But a programme of mass testing wouldn’t be straightforward to implement. It’s possible that this particular cinema chain — which only has enough cash to last until May under current lockdown conditions — could have to keep its doors shut for the foreseeable future.
Glass-half-full investors might still be tempted to nip in and grab a possible recovery play. Cineworld’s expected to report heavy losses in 2021, though successful Covid-19 vaccine rollouts and the introduction of rapid testing could see it beat these estimates. The bulls might also want to buy the cinema chain because of its huge footprint in the world’s biggest movie market. It’s feasible that Cineworld’s estate in the US could deliver big profits in the years ahead.
I’m not tempted to invest in this soaring UK share, though. It still faces considerable near-term risk in my opinion as pandemic lockdowns roll on and its balance sheet remains racked with debt. The rise of streaming giants Amazon, Disney and Netflix — and a changing approach to movie releases that undermines the likes of Cineworld — should provide considerable long-term challenges too.
Better ISA buys?
I’m not saying that investors should ignore all leisure stocks today, however. There are still plenty of top UK shares in this arena I’d buy for my Stocks and Shares ISA today, however.
I’d happily invest in Hollywood Bowl, for example. Consumer trends can be fickle and the resurgence of ten-pin bowling in Britain could evaporate at the drop of a hat. But trading at the company between lockdowns in 2020 suggests that bowling is still a red-hot growth segment for the time being. Besides, Hollywood Bowl is investing heavily in its estate to keep pulling the punters in.
I’d also happily buy shares in Wizz Air today. The low-cost flyer faces considerable profits problems due to mass plane groundings and a rocketing oil price. However, this UK airline share has a strong balance sheet to help it through this turbulence. And it has considerable emerging market exposure to help it deliver long-term earnings growth.
