The Cineworld share price is down 33% in one month! Should I buy?

The Cineworld plc (LON:CINE) share price has been tumbling. Paul Summers wonders if a small-cap peer is a better recovery play.

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Regardless of the risks that come with the end to all Covid-19 restrictions, many UK-listed businesses are desperate for trading to get back to normal as soon as possible. One example is surely battered cinema owner Cineworld (LSE: CINE) whose share price recovery has lost momentum in recent weeks.

Cineworld share price: no mercy

Actually, ‘lost momentum’ is putting it kindly. By yesterday’s close, the Cineworld share price had plunged 33% in just one month.

One reason is a simple lack of demand at its sites, at least relative to how things used to be. Not that this is all that surprising. Despite screens being open for some time now, the movie slate has remained fairly subdued. Blockbuster Fast & Furious 9 is perhaps the only film that’s really brought people back. Production of some nailed-on successes, like Mission Impossible 7, has also been delayed. Again. 

On top of this, the once-mighty mid-cap has all that debt creaking away on the balance sheet in the background. Even the rise and rise of meme stock and industry peer AMC Entertainment across the pond can’t revive the Cineworld share price by association.

However, it’s not necessarily all doom and gloom. The new James Bond film should provide a welcome boost to revenue when it finally arrives in September. A sequel to Top Gun should hit screens in November.

One might also say that the ongoing heavy shorting of Cineworld shares may work in the favour of those already invested if the company is able to surprise on the upside. Should this happen, a ‘short squeeze’ would be very likely, further boosting the Cineworld share price.

The key word there is ‘surprise’. Right now, I’m not exactly optimistic. 

A better bet?

If I were looking to invest in an eventual rebound in cinema visits, there is another option available to me on the London market: 33-site independent cinema group Everyman Media (LSE: EMAN).

In contrast to the Cineworld share price, Everyman’s shares have also held up fairly well recently. They’ve traded around the 150p mark since March this year and are up almost 40% since July 2020. The fact that the firm doesn’t appear to be in quite the same level of distress as its larger peer might be a reason. 

On the flip side, it’s clear that Everyman still faces similar hurdles to Cineworld. The popularity of streaming services offered by Amazon and Disney shows no signs of abating. In fact, a rise in infection levels could force people back to their TVs in the evenings. The good weather we’re experiencing is also pushing people outdoors, making a trip to a dark, enclosed space less attractive.

A further risk to owning Everyman stock is the firm’s small-cap status. As a general rule, minnows tend to be more volatile than large-cap stocks. This is especially true for stocks with a small free float (the percentage of shares available on the market). At 43%, this is very much the case with Everyman.

Horror show

Faced with a choice, I’d probably be more inclined to buy Everyman stock at the current time. Even so, I can’t help thinking there are far less frightening destinations for my cash right now. Undervalued or not, Cineworld remains in my ‘too scary’ pile. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon and Walt Disney. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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