The Motley Fool

The Cineworld share price is up 80% in a week. Is it still my contrarian pick?

Image source: Getty Images.

When I wrote about buying the FTSE 250 multi-national cinema chain Cineworld (LSE: CINE) stock a week ago, I was as contrarian as I have ever been. But now, things have changed. The Cineworld share price is up almost 80% as I write, having made some seriously smart gains in the blink of an eye. 

Why is the Cineworld share price rising?

At any other time, this would have been a surprising development. But not now. There’s a broad stock market rally underway. The FTSE all-share index has gained 4% in November, after losing ground for four months. Pfizer and BioNTech’s success in vaccine trials have made investors bullish again. Added to that, another US-based pharmaceutical company, Moderna, has found even more success in its vaccine trials. Other companies’ vaccine trials are underway too. I expect that at least some of them will also deliver positive results. 

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...

In other words, the possibility of getting past Covid-19 just became even more real. In the meantime, improved sentiment and continued government and central bank support will keep stock markets buoyant in my view. The biggest gainers will be stocks related to pubs, restaurants, cinemas, gyms, airlines, hotels, and tourism. Cineworld is one example of this kind of stock. 

How much more can it increase?

The one question that now comes to mind is: How much more can the Cineworld share price rise? A lot more I expect, probably. The sharp drop in CINE’s share price is more recent than we might think. It isn’t until August that it fell below the present levels of 50p. It stayed at sub-30p levels through almost the entire month even more recently, in October, driven by the continued toll taken by Covid-19. By comparison, even in March, when the stock markets crashed, the share price fell below 30p on exactly one day.

I wouldn’t hazard a share price target for CINE just yet, but I am thinking along the following lines about it. In February, when the coronavirus was just about looming on the horizon, the Cineworld share price was more than three times its current levels. It was almost four times that on average in January. If we are to re-imagine the world devoid of the virus again, this gives an idea of how much scope there is for continued share price rise.

The verdict

Of course, in the meantime, we need to take into consideration the FTSE 250 stock’s weakened financials, which could dampen the extent of its rise. I think its liquidity issues, for instance, could continue to be a challenge in the near term. But hopes of overcoming them are higher too, adding to other factors supporting the stock, also in my last week’s piece. In my view, the case for Cineworld just got stronger. And the risks to buying it declined. After having seen my easyJet shares come back in the green recently after a long while in red, I’m even more encouraged to add CINE to my portfolio.

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!

Manika Premsingh 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.

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.