The Motley Fool

Cinemas have re-opened. What does that mean for Cineworld shares?

Image source: Getty Images

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?

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

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.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.