If I were to make a list of the biggest losers on the stock market due to the pandemic, Cineworld (LSE:CINE) would be close to the top. Is the current resurgent Cineworld share price an opportunity for my portfolio or still one to avoid?
Cineworld share price woes
When the pandemic hit and markets crashed, Cineworld was a victim of restrictions and lockdowns. Doors were shut and the film industry ground to a halt.
As I write, the Cineworld share price is trading for 75p per share. This time last year, shares were trading for 27p per share. A 177% return in 12 months sounds great but there is much more to consider when it comes to Cineworld. To provide some context, shares pre-pandemic at the beginning of 2020 were trading close to 200p per share.
In the past two weeks alone, shares have jumped from 60p per share to 75p per share, a 25% hike. This mini-resurgence has largely been due to the release of the James Bond film No Time to Die, the latest outing of the world-famous franchise. Tickets have been selling fast and well. In fact, sales have been close to pre-pandemic levels. Could Cineworld finally begin to recover from its woeful time of late?
For and against
Looking at the current Cineworld share price and recent news, here’s a quick for and against whether I should invest or not.
FOR: Pent up demand and the film industry resuming cinematic releases could help Cineworld return to profitability. The James Bond film could be the catalyst for this recovery. If ticket sales are anything to go by, people are excited to get back into cinemas and enjoy the silver screen experience once more.
AGAINST: Cineworld’s balance sheet is not in great shape. Cineworld had to borrow extensively to keep the lights on when there was no revenue coming in. I am usually put off when a firm has to do this. In its recent trading update for the period ending 30 June 2021, it reported £3.4bn worth of borrowings. Based on the current Cineworld share price, its market capitalisation as I write only stands at £1.04bn. This is a concern for me.
FOR: Despite debt levels, Cineworld does have a healthy cash balance that could help it get back on its feet. In the same update, Cineworld confirmed it had $437m of cash at the end of June. Furthermore, Cineworld is considering a US-listing for its business. This could free up some capital to potentially reduce debt levels but at this time no one knows what this listing could or would look like if it were to happen.
AGAINST: Competition from streaming platforms will hinder all cinemas and Cineworld is no different. When restrictions were in force, consumers turned to Netflix, Amazon Prime, Disney Plus, and many more in the comfort of their own homes. These platforms continue to grow and gain subscribers.
Overall, I am not buoyed by the recent Cineworld share price resurgence. Reviewing the case for and against, the negatives far outweigh the positives for me. I will keep a keen eye on developments, however. I love going to the cinema and will continue to do so but I would not invest in Cineworld shares for my portfolio right now.
Jabran Khan 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.