This surging penny stock combines my passions for film and finance into a soaring growth opportunity. Everyman (LSE:EMAN) operates a boutique cinema chain bringing premium viewing experiences to audiences across the UK. And with blockbusters lighting up screens, the future looks bright.
This penny stock may be down 27% this year, but investors shouldn’t rule out its potential just yet. Canaccord Genuity Group has a price target of £2 for Everyman shares. This indicates a potential gain of over 200% if the cinema chain continues to grow rapidly.
Last month, Everyman enjoyed record weekly admissions fueled by smash hits like Barbie and Oppenheimer. This saw its July revenue jump almost 50% to £10.6m from £7.1m. But perhaps more encouragingly, its EBITDA doubled to £2.6m.
With more crowd-pleasing films lined up for the rest of 2023, revenue and profits should continue to grow. The company is also rapidly expanding its footprint, as it’s on track to open new upmarket cinemas this year and the next. As such, this penny stock is still in its early stages of growth.
Some sceptics are of the opinion that streaming will kill cinemas, which seems reasonable enough, but I disagree. Rather, I hold the view that after years cooped up at home, people crave communal, larger-than-life viewing again — and going out for a movie is an experience streaming can’t replicate.
This is even more true for an experience like Everyman. Its luxurious theatres feature spacious leather seats, premium food, and bars. This creates an exceptional viewing experience versus stale mega-chains — and its attendance last month proves the cinema’s resilience.
With the right slate, people are still flocking to cinemas for an immersive escape. Thus, the penny stock’s smart pivot towards premium amenities and services to differentiate itself from Netflix on the couch has been working out well thus far.
Its pricing power also appears robust due to its more affluent customer base. Despite raising ticket prices, demand doesn’t seem to be dying down. As a result, profitability has rebounded quickly after lockdowns eased.
Everyman’s small size provides nimbleness too. The firm often spots growth opportunities its competitors overlook. This has been the case with its improved ancillary offerings through an extensive food and drinks menu.
Management says they plan to grow their estate over the long term. With only 34 venues now, this still leaves an enormous runway for the group to grow, especially when compared to the hundreds of chains Cineworld currently has. Therefore, this penny stock deserves a higher multiple with so much potential.
Balance sheet worries are certainly a concern, considering the relatively hefty amount of debt Everyman carries. Nonetheless, investors may find some relief in the fact that it recently announced a new three-year loan facility of £35m to replace its existing credit arrangements.
For investors like me, buying growth stocks could lead to life-changing returns. At 60p per share today, I’d be willing to invest a reasonable £6,000 in Everyman today for the potential to grow that to £14,000. This penny stock offers a front-row seat to cinematic gains, especially if it hits its price target.