Investing in penny stocks can be a risky endeavour. Share prices can be extremely volatile, meaning that I could nurse a heavy loss if I have to sell my holdings sooner than expected.
That said, small-cap shares like these also have considerable growth potential. This gives me as an investor the possibility to supercharge my long-term returns.
Opening a small position in penny stocks could be a good plan for me right now. Everyman Media Group (LSE:EMAN) is one I’m considering buying for my UK shares portfolio next month.
Signs of life
Buying shares in cinema chains like Everyman may appear high risk today. Demand at the box office remains uncertain as the cost-of-living crisis endures. The threat from streaming platforms like Netflix and Amazon’s Prime is also considerable following Covid-19.
However, blockbuster ticket sales during the so-called Barbenheimer weekend are encouraging me to buy Everyman shares. They suggest the public’s long love affair with the big screen still has plenty of life left in it yet.
The twin releases of Barbie and Oppenheimer in recent days have delivered analyst-busting ticket sales. Major chain Vue says it has enjoyed its best weekend since 2019, and chief executive Tim Richards commented that Barbie has “a good chance of getting into the Top 10 highest grossing films of all time”.
He added that “it is an incredibly exciting moment for the industry, and we expect this trend to continue for the coming weeks”.
Everyman’s share price has fallen 47% over the past year amid lingering industry concerns. This weekend’s strong performance suggests now could be a time to buy the penny stock as a recovery play.
Why I’d buy this penny stock
I think investing in this penny stock could be a better idea than Cineworld or any other UK or US cinema operator. Its position at the premium end of the market may better protect it from sales weakness as the cost-of-living crisis continues.
Admissions in 2022 soared to 3.4m from 2m the year before. This was despite a 29p increase in the average price of a ticket (to £11.29). Meanwhile, the amount spent on food and beverages per head increased to £9.34 from £9.07 previously.
Everyman’s broader product offering also helps it combat the threat of streaming platforms better than standard operators like Cineworld. Its cinemas also offer a place for people to grab a meal and a drink before or after the movie. This gives people extra reason to leave the sofa.
I think earnings here could rise strongly as the company expands. It’s on course to open six new cinemas during 2023 alone, taking its estate to a total of 44 sites. The business plans to continue rapidly building scale too and has “an exciting pipeline of further opportunities for 2024 and 2025”, it said in April.
On balance, I believe Everyman could be one of the best penny stocks to buy right now.
