The world ‘tumultuous’ seems to exist exclusively to describe the Cineworld (LSE: CINE) share price recently. In March, the coronavirus pandemic pushed it down to just 18p, before the rumours of an easing lockdown helped it wander back above 100p.
At the time of writing, Cineworld shares are sitting around 56p. And that’s after re-opening some of its screens. In a pre-Covid environment, the world’s second-biggest cinema chain had been on a relatively consistent downturn, but its share price was consistently above 200p until 2020 rolled around. Will we ever see that return?
What went wrong with Cineworld shares?
Just a few months into 2020, Cineworld was hit by a landslide of changes impacting the cinema industry, including the closure of all 787 of its theatres.
Even after re-opening on July 31st, blockbusters like Tenet and Mulan were nowhere to be seen, though the two films have gone down completely separate routes since. While Tenet was eventually released in the UK on August 26th, Disney announced at the start of August that Mulan would be added to its Disney+ service, at the cost of already paying subscribers.
This could allow audiences to host their own ‘premieres’, thus skipping the need for cinemas entirely. While the head of The UK Cinema Association, Phil Clapp, previously described the decision as “a step backwards”, there is no telling yet how successful it has been or if it could become common practice. Having said that, early figures have suggested that downloads of Disney+ are up 68%.
Just a few days before Disney’s announcement, Universal Pictures and Focus Features struck a deal with AMC Entertainment that allows for films to appear on streaming services just 17 days after they are released. The previous period was 75 days, which is an almost five-fold reduction that could seriously harm cinema takings and the resultant Cineworld shares.
Beyond the recent developments in streaming, Cineworld was already dealing with sky-high debt and the messy failure (and resultant court case) of its Cineplex acquisition.
While it would take a lot to put them completely out of business, Kirsteen Mackay doesn’t see much room for growth either way.
But there have been some positive developments
My outlook is slightly more positive. As mentioned above, Tenet has finally made it to cinemas. While capacity isn’t currently being reached, the release of blockbusters like No Time To Die and Black Widow in November should see a continued rise in both attendance and, hopefully as a result, Cineworld shares.
There are positives for Cineworld happening behind the scenes, too. In mid-August, a federal judge allowed for the ‘Paramount Decree’ to be lifted, essentially putting a stop to a law that prevented film studios from buying their own theatres. While this is bad news for independent film studios, it has the potential to work in Cineworld’s favour should studios be interested in buying out some/all of its US screens, though of course, this isn’t a guarantee.
There is still a lot of risk involved
All in all, Cineworld shares are rocky at best. However, if the dramatic recent changes in the world of streaming don’t become the new normal and the company is able to make use of the abolition of the Paramount Decree, then there is a very real chance that Cineworld shares could climb back towards triple figures as the film industry gets back on its feet. At the same time, nothing is set in stone, and we all know the impact that a second wave of coronavirus would have.
Dan Peeke owns shares in Cineworld. 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.