Since the middle of July, the Cineworld (LSE: CINE) share price has been treading water. It has traded in a range between 67p and 61p for much of the past two months as buyers and sellers have been fighting for control. Despite this recent tug of war, over the past 12 months, shares in the company have added 15%.
Considering its recent trading performance, I have been wondering what is going on with the Cineworld share price and if anything could drive the stock higher in the near term.
Upcoming catalyst
The company’s performance in the first half of the year was dismal. The impact of global lockdowns took their toll on the enterprise. It reported an earnings before interest, tax, depreciation, and amortisation (EBITDA) loss for the period of $21.1m. Meanwhile, the group reported a monthly cash burn of $45m.
So far, there has not been much to attract cinemagoers back into theatres. However, that will change in the second half, with a slate of big blockbuster movies set to arrive on the big screen.
The long-awaited James Bond film, No time to die, is one of the most anticipated releases of the past few years, and Cineworld’s management will be looking to this title to provide a boost for the group in October.
What does this mean for the Cineworld share price? I think the market is waiting to see how cinemagoers react to these new releases before pushing the stock higher.
The group currently faces some significant challenges, including high levels of debt and the rise of online streaming. The company needs to prove that it still has something customers want, which could be pretty tricky.
Cineworld share price challenges
The way I see it, investors are currently approaching the Cineworld share price with caution. It is facing significant headwinds, and the company needs to prove that it has what it takes to overcome these issues.
Management should provide an update on the company’s progress later in the year, and if this is positive, I expect the Cineworld share price to head higher.
However, if the update disappoints, investors could start to sell the stock again. After all, there are plenty of other recovery stocks on the market which are experiencing faster comebacks. Cineworld is not the only business that has recovery potential.
Considering all of the above, I would not buy the stock. I think it has been trending sideways because investors are waiting for further information from the company detailing its recovery.
Unfortunately, at this point, when the company does update the market, there is no guarantee it will be a positive update. If cinemagoers fail to come back in large numbers, trading figures may disappoint, and this could even make it difficult for Cineworld to sustain its borrowing.
