Will the Cineworld share price double in 2022?

The Cineworld share price is up by nearly 25% already this year. Roland Head asks if he should be buying now ahead of a continued recovery.

| 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.

Key points

  • Cineworld’s customers are flocking back to the big screen
  • The company says that it’s now generating positive cash flow
  • But the $8bn debt pile remains a big worry for me
  • And the threat of a C$1.2bn legal penalty can’t be ignored

Cineworld Group (LSE: CINE) shares surged on Friday after the company said that cinema revenue rose to almost 90% of 2019 levels in December. The Cineworld share price has now risen by almost 25% so far this year.

I’ve been taking a fresh look at the latest news and crunching the numbers. Should I add the shares to my portfolio in hope of a quick double bagger?

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

People still like the cinema

Covid-19 was a disaster for cinemas. But there’s light at the end of the tunnel. Pandemic predictions that we’d all stay at home and stream movies on television are turning out to be wide of the mark.

Cineworld said box office and concession revenue rose to 88% of 2019 levels in December. The recovery was strongest in the key US market, where cinema revenue surged to 91% of pre-pandemic levels.

Strong attendance was helped by an impressive slate of new films, including Spider-Man and No Time to Die. I’m confident this recovery will continue. More blockbuster movies are expected over the coming months, including new Batman, Top Gun and Jurassic World titles.

Money worries?

Friday’s trading update was short on financial detail. The company didn’t provide any clues on whether 2021 revenue would hit forecasts. The only thing we know is that Cineworld generated positive cash flow during the final quarter of 2021.

We’ll find out more when Cineworld issues its 2021 results on 17 March. But to be honest, we know 2021 was bad. In my view, what matters most is the outlook for 2022 and 2023.

Broker forecasts suggest that Cineworld’s recovery will accelerate this year. City analysts think that the group could generate around $420m of surplus cash in 2022. That might allow CEO Mooky Greidinger to start repaying some of the group’s $8.4bn net debt.

Earnings are also expected to recover. Broker forecasts suggest earnings of 1.5 cents per share in 2022, rising to 13.1 cents per share in 2023. That prices Cineworld shares on 36 times 2022 forecast earnings, falling to just 4.2 times projected 2023 earnings.

If the recovery goes to plan, I guess Cineworld shares might be cheap at current levels.

My verdict

Cineworld’s share price is still 40% lower than it was one year ago. One cloud hanging over the firm is a recent Canadian court ruling that it must pay rival Cineplex C$1.2bn in damages for a failed acquisition deal.

The UK company is appealing that verdict, but if Cineworld loses I think it will be difficult to find the cash without further fundraising activity.

For me, this situation is too much of a gamble. If everything goes right for Cineworld, I think the shares might double this year.

But there’s a lot that could still go wrong. And with nearly $10bn of potential liabilities, I think the shares could also fall sharply in 2022. I’ll be staying away.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Roland Head 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

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

As the Footsie ticks downward, here’s what I’m doing!

The Footsie moved downwards on Thursday morning after the steepest rout for US stocks in almost two years on Wednesday.

Read more »

Passive income text with pin graph chart on business table
Investing Articles

3 ‘no-brainer’ passive income stocks to fight 9% inflation

With prices rising (and the value of cash savings eroding), Paul Summers picks out three stocks he'd buy for passive…

Read more »

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

5.2% dividend yields! Should I buy this cheap FTSE 100 share?

This FTSE 100 dividend share has risen in price recently. Yet at current levels it still looks extremely cheap on…

Read more »

Burst your bubble thumbtack and balloon background
Investing Articles

How high could the Woodbois share price go?

Jon Smith admits that there seems to be more room to run for the Woodbois share price, but explains why…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

2 penny stocks to buy and hold until 2032

I'm searching for the best penny stocks to buy and own for the next 10 years. I think the following…

Read more »

Smiling senior white man talking through telephone while using laptop at desk.
Investing Articles

Here’s how I’d spend £3,000 on UK dividend shares right now

There are many reasons to consider dividend shares today, including soaring inflation. Our writer explores two top picks that he’d…

Read more »

Social media and digital online concept, woman using smartphone
Investing Articles

Apple stock: Buffett is long, Burry is short. What should I do?

Our author thinks about whether following Warren Buffet into Apple stock might be a good addition to his portfolio –…

Read more »

Close-up of British bank notes
Investing Articles

5 ‘no-brainer’ dividend shares to buy today

Is there an easy way to narrow down the list of FTSE 100 dividend shares? I try one approach, with…

Read more »