The Cineworld share price is falling! Is now the time to buy?

Despite an encouraging start to 2021, the Cineworld share price has dropped to 64p. This Fool examines if it is now time to invest in Cineworld shares.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Cineworld (LSE: CINE) share price has fluctuated significantly during 2021. The success of the vaccine program in the UK at the start of the year pushed the price in a positive direction. It even reached a high of 122p on 19 March, but now it has dropped to less than half of that price at 64p. 

So what has changed? Despite restrictions being lifted, movie goers are still anxious about sitting in one big room together. The new delta variant has been an additional twist in the story and has stunted Cineworld’s initial plans for recovery. 

Despite this, I think Cineworld at 64p is undervalued. There could still well be a renaissance in the return to the movies if infection rates drop and the vaccines keep rolling out. Here’s why I’m thinking it might be an opportune time to buy Cineworld shares for my portfolio.

May the Pfizer be with you

From January 2021 to March, the Cineworld share price jumped up by more than 163%. Evidently there was a lot of expectation that Cineworld could recover from the pandemic, by investors and me included. Unfortunately, due to the emergence of the delta variant, those early predictions turned sour quite fast. It became apparent to me that the overall recovery might be a lot slower than first imagined. 

But while the share price continues to fall, so too do the number of Covid-19 cases. This is why I believe it could be an opportune time for me to buy shares in Cineworld. 

I also believe that many cinema goers are itching to get back to the big screen. Personally, I used to love going to the cinema and would go at least once a week. I think this demand is just bubbling at the surface for the moment and hopefully there will be further data showing a continuation in the decline of cases.

The pandemic awakens 

While I am hopeful that the Cineworld share price will bounce back in 2021, I am not ignorant of the devastation that shook the cinema industry because of Covid-19. 

Five years ago the share price was trading at 260p, whereas it is now at 64p, which is a 75% drop in price. If you take a look at Cineworld’s financials and balance sheet, they are also far from encouraging. Revenue dropped by almost 80% between 2019 and 2020. Further, average annual cinema-spending per head population in the UK dropped from £18.72 in 2019 to just £4.37 in 2020. 

Needless to say, the recovery for the cinema industry will prove to be a mountain to climb. 

A new hope for the Cineworld share price

However, I believe, eventually, there will be a return to the cinemas and the recent statistics show that a future evening in front of the big screen might not be that far away. 

With the Cineworld share price being in my opinion seriously undervalued at 64p, I think this could be a very intriguing stock to keep an eye on and so I am very tempted to add Cineworld to my portfolio. 

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 Town has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Mixed-race female couple enjoying themselves on a walk
Investing Articles

A once-in-a-decade chance to get rich buying growth stocks?

We haven't seen a good spell for growth stocks for quite a few years now. But I reckon the signs…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

The FTSE 100 is full of bargains! Here’s 1 stock I’m eyeing up

A weak economic outlook has hurt the FTSE 100. This Fool explains why she likes the look of this consumer…

Read more »

Investing Articles

2 no-brainer beginner FTSE 100 stocks to buy for my portfolio

Getting started with investing can be daunting. Here are two stocks for beginners to consider buying to build their first…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

2 recession-resistant UK shares investors should consider buying

Our writer details two UK shares she feels could withstand some of the ill-effects of the current malaise to provide…

Read more »

Tanker coming in to dock in calm waters and a clear sunset
Investing Articles

Glencore share price drops on results. Time to buy?

The Glencore share price wobbled a bit after a weak set of 2023 results. Here's why I have the stock…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Big trouble in China sinks HSBC shares. Should I invest after record FY results?

HSBC shares have slumped following a disappointing end to 2023 for the FTSE stock. Royston Wild explains why this may…

Read more »

View of Tower Bridge in Autumn
Investing Articles

3 dirt cheap FTSE 100 shares to snap up today?

The FTSE 100 is rallying, but many shares still look super cheap on fundamentals. Is our writer buying these three…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

FTSE 100 earnings: what can we expect from Rolls-Royce in 2024?

The Rolls-Royce share price tripled in 2023. Roland Head wonders whether this FTSE 100 stock could continue that impressive trajectory…

Read more »