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Is Cineworld’s share price about to soar?

Cineworld cinema
Image source: DCM

The Cineworld Group (LSE: CINE) share price has continued to trade in a sideways motion in recent weeks. Sure, news on cinema admissions in the US and UK has been impressive since theatres opened en masse in the spring. But rising Covid-19 infection rates in these territories — and growing fears of fresh lockdowns as a result — have stopped the CINE share price from advancing.

Could the Cineworld share price be about to soar again? And should I buy the UK leisure share for my investment portfolio?

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Reasons to be bullish!

Here are a couple of reasons why I’d buy the cinema chain’s shares today:

  • Blockbusters remain ultra popular. A steady stream of sequels, reboots, and new releases from the world’s most popular film franchises have helped the global box office hit record highs in recent years. Much to the annoyance of many movie critics it seems that the pull of these blockbusters remains at pre-pandemic levels. Strong ticket sales for James Bond’s latest outing, No Time To Die, for instance give the likes of Cineworld plenty to be confident about.
  • Leisure spending keeps rising. Robust box office activity in 2021 has been helped by cooped-up people looking to get out of the house again in vast numbers. According to Barclaycard, spending on the broader entertainment sector increased 24.2% in August. That’s comfortably above the 15.4% rise in broader consumer spending. This disparity might be particularly pronounced today. But people were spending more on leisure compared with other retail areas before the pandemic, too.

Why I worry about Cineworld’s share price

The appeal of the cinema with the general public remains pretty solid, then. And pleasingly, the conveyor belt of money-spinning popcorn movies coming out of Hollywood is speeding up again. But does this make Cineworld a top turnaround stock for me to buy?

Well it’s worth noting that institutional investors and hedge funds remain quite bearish on the Cineworld share price. According to shorttracker.co.uk, an eye-popping 8% of the company’s shares are being shorted. That puts it at the top of the list and well above second-placed Carillion (at 7.2%).

There are several reasons why I worry about Cineworld’s share price. As I said, Covid-19 infection rates have been resurgent of late. And they threaten to worsen in the winter, a scenario that could see Cineworld and its peers shutter their doors again. This is a massive worry considering the huge amount of debt the penny stock has on its books.

I’m also concerned about the impact that streaming services like Netflix will have on the long-tem future of cinema. Trade paper Variety recently reported on a survey from the Independent Cinema Office that shows 87% of UK operators believe that increasing audiences over the next one to three years (and particularly in the critical under-30 category) is their biggest challenge. Their concerns could get worse as the US streaming giants invest more and more in technology and in content, too. All things considered, I think Cineworld remains a risk too far for me. I’d rather buy other UK shares today.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Netflix. 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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