After falling from a high of around 222p in March to a low of just 57p in the middle of July, the Cineworld (LSE: CINE) share price has been treading water in August. Over the past 12 months, the stock’s returned around 20%.
It seems to me as if the market’s waiting for more information from the company regarding its most recent trading. According to its interim results for the period ended 30 June, cinema goers have returned to the group’s theatres since they were allowed to reopen.
Unfortunately, the returning numbers haven’t been enough to help the company report a profit. And it could be some time before the group reaches profitability.
According to its interim results, box office admissions across the organisation were down 64% year-on-year in the first half. Total revenue also declined 59%. The group also revealed an operating loss for the period of $209m.
But management’s confident that new film releases will help admission figures recover throughout the rest of 2021. And I think improving consumer confidence will also help the firm return to growth.
Still, only time will tell if this is going to be the case.
Cineworld share price outlook
Overall, it looks as if the company’s heading in the right direction. However, it also appears as if the market’s waiting for further news from the business regarding its recovery.
The company might not release any update in September. Nonetheless, if the economy remains open, I think it’s not unreasonable to say the number of admissions to cinemas will increase.
What’s more, if new film releases aren’t postponed, this could be a strong indicator customers are returning to screens, supporting the Cineworld share price.
We may also get an update over the next month regarding its plans to list in the US. Cineworld disclosed in its interim results that the firm was considering options for its US business, including a listing across the pond. This could unlock much-needed capital to help the enterprise pay down serious debt and improve financial stability.
Considering all of the above, I think investor sentiment towards the Cineworld share price could improve dramatically next month. Of course, that’s the best-case scenario.
Risks and challenges
As the company rebuilds after the pandemic, it faces some significant challenges. These include the prospect of another lockdown and dealing with its momentous debt pile.
If borrowings aren’t brought under control, they could threaten the company’s financial viability. Another lockdown may also set back its growth plans significantly.
Based on these risks and challenges, even though I think the outlook for the Cineworld share price is improving, I wouldn’t buy the stock today. Certainly until the business has reduced debt substantially, I think the stock’s outlook is just too unpredictable.
